For California car dealers, new regulation tied to the Combating Auto Retail Scams (CARS) Act, covering price transparency, documentation, and invoking a new return period on used vehicles, kicks in Thursday, Oct. 1.
“The California Cars Act is probably the most significant change to the rules governing car sales and the buying process in 20 years since the Car Buyers Bill of Rights back in ‘06,” California New Car Dealers Association President Brian Maas told CDG News. “It's going to require dealers to make significant changes to how they operate.”
Driving the news: Almost a year ago, California Gov. Gavin Newsom signed into law the CARS Act, which was patterned after the Federal Trade Commission’s CARS Rule, which was vacated in January 2025 after federal courts ruled the agency did not follow proper notice requirements.
The California rule focuses on price transparency, with dealers having to disclose the total price and financing in any advertisement and in the first communication with a customer.
Maas points out the requirements echo much of the language in the FTC’s recent FAQs on price transparency.
“The California Cars Act has total price advertising disclosure, and that's what the FTC has said in their FAQs that they issued earlier this month and in the 97 warning letters they sent to dealer groups earlier this year,” Maas said. “There was a difference between California law in the Cars Act and the FTC in terms of whether certain dealer charges had to be included in the total price. But now that the FTC has made it clear that everything except government fees and taxes has to be included, we're advising consistency with the FTC's.”
Written disclosures: Most dealers are looking at needing, at minimum, three written disclosures for any customer getting into the showroom to “pencil” or to work on the financials of a specific vehicle, Aaron Hartshorn, National Director of F&I for KPA, told CDG News.
First disclosure is total price disclosure that must be FTC-compliant with the walk-out-the-door price, with any doc fees and emission fees included.
The second disclosure, Hartshorn explained, would be the monthly payment comparison for financing that also includes the total price.
A third disclosure would cover the price of add-ons and F&I products that must be presented as optional and provide value to the customer.
“To protect the dealership, your dealership would have those three disclosures on your worksheet on your first pencil to customer because most dealerships are trying to provide some optional products on the sales floor,” Hartshorn said.
Record keeping: For those customers making it to pencil or receiving written communications about pricing, records must be kept for two years.
Hartshorn stressed “dead-deal jackets” will need to change to document any deal put to pencil.
He noted that customers coming onto the lot and just inquiring about the price would not constitute communication that would need to be documented.
“It's when it actually turns into a written communication,” Hartshorn said.
Maas noted that vendors are working on solutions for storing the documentation, which is one of the major changes.
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Return policy: Maas said the most significant change with the law is the 3-day return option for used vehicles under $50,000.
The provision does include a 400-mile limit.
Dealers can charge a restocking fee of $175 for vehicles under $5,000, $375 for up to $10,000, and a maximum of $500 for vehicles above $10,000.
Dealers are to retain trade-ins until the right-to-cancel period expires.
Bottom line: Dealers in California have had nearly a year to prepare for the new rules and work with vendors to make sure documentation is in place. Maas said they worked with lawmakers to negotiate the year-long runway for dealers to work on compliance, and the CNCDA has provided extensive resources.
“No dealer's excited about new processes and procedures, for sure, but we feel like they can comply, and especially relative to the total price disclosure with the FTC's guidance,” Maas said. “This is the direction that the industry is moving.”
Hartshorn noted their firm is getting a lot of calls from dealers to make sure they are in compliance.
“I would say, in a percentage-wise, half the California dealerships were ready to rock and roll September 1, with good things in place,” Hartshorn said. “I think that probably the other half kind of waited till the last minute. And I also think that some of the vendors and software suppliers were delayed in releasing their information as well.”
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