First-in-nation 3-day cooling off period for used car buyers
SACRAMENTO — At a time when the already-high price of cars is projected to skyrocket even more due to tariffs imposed by President Trump, the California legislature voted to pass SB 766, the California Combating Auto Retail Scams (CARS) Act, championed by Senator Ben Allen (D-Santa Monica), to make buying a new or used vehicle in California from a car dealership more affordable and less risky.
“For years, car shoppers have often complained about deceptive practices that lead to higher prices or unfair deals,” said Senator Allen. “The California CARS Act will make cars more affordable, and will benefit both car buyers and honest car dealers by making the car market in California fairer and more competitive.”
The first part of the bill is modeled after the Federal Trade Commission’s Combating Auto Retail Scams (CARS) Rule, which was overturned by the federal Fifth District court solely on procedural grounds in a split (2-1) decision before the Rule could take effect. Under Trump’s appointees, the FTC has not re-issued the Rule. Leading economists projected that the FTC’s CARS Rule would have saved American car buyers $3.4 billion each year, plus 72 million hours annually otherwise spent shopping for cars, haggling over the price, being subjected to bait-and-switch practices, and getting stuck with unwanted, expensive add-on products that boost profits for car dealers and lenders, but are often of little or no value to consumers.
The same economists, from Stanford, MIT, Clemson, University of Arizona, and University of Michigan, conservatively project that enactment of the CARS Rule provisions in SB 766 will save California car buyers $234 million in reduced search costs and another 8.5 million hours in time savings – each year the law is in effect. They did not evaluate the second part of the bill, which creates a new, first-in-the-nation 3-day cooling off period for used car buyers.
Key provisions of the California CARS Act
- Requires car dealers to disclose the “total price” up front and in advertising, making car prices more transparent and enabling car buyers to comparison shop for a good deal online without having to spend hours at car dealerships just to find out the price.
- Prohibits dealers from selling worthless add-on products that fail to provide any benefit to the car buyer, such as lifetime oil changes for an electric vehicle or service contracts that fail to cover pre-existing conditions like prior damage from wrecks or floods
3-day Cooling-Off Period for Used Car Buyers
SB 766 will provide used car buyers, including ride share workers and small businesses that purchase or lease used vehicles that cost $50,000 or less, a new 3-day cooling off period. They will have the right to return the car for any reason within 3 days, for a full refund, minus a restocking or shipping fee. The fee is capped at 1.5% of the total cost of the car, with a minimum of $200 and a maximum of $600. The car can’t be driven more than 400 miles. Dealers may charge $1 per mile for mileage over 250 miles. The car must be in the same condition, except reasonable wear and tear and any defect or mechanical problem that becomes evident and that the car buyer did not cause.
The cooling off period will allow car buyers time to review the paperwork without being under pressure. Many will be also able to get the car inspected by an auto technician with the necessary diagnostic equipment for detecting odometer or emissions tampering, prior damage, latent safety defects, and other major problems. Car buyers will not have to file a lawsuit, go to arbitration, or prove they were cheated in order to return the car and get a refund.
California Attorney General Rob Bonta led a coalition of 19 state attorneys general in support of the FTC’s CARS Rule. In August, Attorney General Bonta sent legislators in Sacramento a letter expressing his support for passage of SB 766.
“A car is the largest and most important purchase many Americans make. At a time when the FTC is falling down on its job of protecting American car purchasers, its great to see California standing up for them,” said FTC Commissioner Rebecca Kelly Slaughter.
“We hope Governor Newsom will become the first Governor in the nation to enact this landmark legislation to help address the #1 source of consumer complaints: auto sales scams,” said Rosemary Shahan, President of the non-profit consumer organization Consumers for Auto Reliability and Safety, which led the coalition in support of SB 766.
“This bill will help empower California car buyers to avoid being taken for a ride when they buy a new or used car,” said Robert Herrell, Executive Director of the Consumer Federation of California.
“This bill is a significant step forward for California consumers and for an industry that has been allowed to get away with outrageous sales tactics for far too long,” said Ted Mermin, director of the California Low-Income Consumer Coalition. “Today, when you ask a car dealer how much a car costs, you’re going to get a three-hour wait in an office. When the CARS Act takes effect, you’re going to get a direct answer.”
“The CARS Act will protect millions of Californians from costly auto sales scams and make the car-buying experience easier and more transparent,” said John Van Alst, senior attorney at the National Consumer Law Center and director of its Working Cars for Working Families project. “We applaud the work of Senator Allen and the California Legislature and encourage state legislatures across the nation to act to protect auto buyers.”
“As the FTC abandons protections for car-buyers, it’s great to see California stepping up to fight hidden costs and wasted time,” said Sam Levine, Senior Fellow at Berkeley’s Center for Consumer Law and Economic Justice and former Director of the FTC’s Bureau of Consumer Protection. “By requiring upfront prices and banning junk add-ons, the CARS Act will strengthen transparency and competition and save Californians money.”
“It’s great to see California stepping up to help fill the void at the FTC in protecting car buyers from predatory car dealers and lenders,” said Erin Witte, Director of Consumer Protection for the Consumer Federation of America.
For many months, car dealers and auto lenders and their trade associations attempted to kill SB 766. But the bill kept moving forward, thanks to “AYE” votes from Democrats. After many amendments were adopted to address concerns they raised, the dealers and lenders eventually dropped their opposition and the bill passed with widespread bi-partisan support. Dealers also demanded a delay before the bill will take effect. Legislators agreed to a delay of 10 months from the usual date – until October 1, 2026.
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