California's CARS Act (SB 766) Is Official: What Auto Dealers Must Know Before October 2026

In September of 2025, the California Legislature passed Senate Bill 766 (CARS Act). The law introduces new requirements for auto dealers and provides additional consumer protections. The CARS Act goes into effect on October 1, 2026, and there are several notable changes to existing law that dealers need to be aware of before the CARS Act becomes operative.

Prohibition on Dealer Misrepresentations

The Act will prohibit dealers from making misrepresentations regarding the following:

• Costs or terms relating to purchasing, financing, or leasing a vehicle.
• Costs, limitations, or benefits of add-on products or services.
• Whether the final contract is for a lease or purchase.
• The availability of vehicles at the advertised total price.
• Consumers' pre-approvals or guarantees for product, service, or term.
• Information on or about consumer credit applications.
• Whether the dealer will keep the cash down payment or trade-in vehicles if the consumer does not go forward with the transaction.
• Dealer payoffs for vehicle trade-ins.
• Remedy for dealers failing to sell or lease vehicles at the advertised price.
• Dealer and dealer personnel's affiliation and or approval by governmental entities.
• The circumstances of potential vehicle repossession.
• The ability to move the vehicle outside of California or the United States.

Disclosure Rules for Advertised Prices

The CARS Act will require advertised prices to be disclosed "clearly and conspicuously" in any advertisement that references a specific vehicle for sale or represents a monetary amount or financing term. Additionally, the advertised price will be required to be disclosed in the first communication with a consumer inquiry about a specific vehicle. If the inquiry is in writing, the advertised price must also be disclosed in writing, that writing must be maintained by the dealer for at least two years, and that writing must be provided to the consumer upon written request. This, however, does not apply to used vehicles sold at auction.

Regulations on Add-On Products and Services

The CARS Act adds additional regulations related to optional products. The CARS Act prohibits dealers from charging for an add-on product or service that a consumer would not benefit from (e.g., oil changes for electric vehicles). These optional products would also require payment to be made to third-party providers within 10 days of the sale or lease—unless there is another written agreement in place.

3-Day Used Vehicle Cancellation Policy

The CARS Act eliminates the contract cancellation option agreement for used vehicles and replaces that with a mandatory "3-Day Right to Cancel Used Car Purchase or Lease." Dealers may charge a restocking fee to consumers who exercise their right to cancel.

This right applies to vehicles:

• Equal to or less than $50,000.
• Driven less than 400 miles between the sale and the cancellation.
• Returned with "reasonable wear and tear."

Dealers will be required to provide a document titled "3-Day Right to Cancel Used Car Purchase or Lease" for qualifying transactions with a litany of specific disclosures.

Requirements for Document Retention and Recordkeeping

Dealers will be required to retain records for a period of two years from the date of record creation to demonstrate compliance with the CARS Act. This will include records relating to advertisements, communications, contracts, cancellation requests, and written complaints received.

What Auto Dealers Must Know

The CARS Act will officially take effect on October 1, 2026, and changes will be implemented regarding how auto dealers sell, advertise, and document vehicle sales. Important changes include prohibitions on dealers making misleading statements on aspects of the sale or lease of vehicles. Also, specific vehicles must have clear and conspicuously disclosed prices in advertisements, including consumers' inquiries. The CARS Act also focuses on limiting the sale of add-on products and services that provide no real benefit to consumers. It also replaces the current contract cancellation option with a mandatory "3-Day Right to Cancel." Finally, the CARS Act imposes strict two-year recordkeeping obligations regarding advertisements, communications, contracts, cancellation requests, and written complaints received.

The full text of the Senate Bill 766 (CARS Act) can be found here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.