California is preparing to roll out breathtakingly massive automotive consumer-protection laws, most of which will take effect in October 2026 and some in January 2026. These changes will require significant re-training of staff, new advertising procedures and possibly web sites, and retention of advertisements and disclosures even if a vehicle is not sold. It further requires retaining the text messages of sales persons with customers. Dealers must adapt to these new laws by employing low cost AI driven solutions and specialized software, as attempts to comply without such tools and without trained staff will be impossible and is full of pitfalls and opportunity for customers to sue. Dealerships must employ verifiable ongoing training tools, especially in high staff turn over areas such as sales.
The most important takeaway: casual compliance failures that were once thought to be harmless will now be treated harshly by the State of California, consumers and their attorneys. The issue is no longer whether the vehicle was a lemon or not, or whether the vehicle’s prior history was disclosed or not, or even whether the car was safe at the time of sale or not . You can sell a perfectly good vehicle that later develops repairs and still be sued for technical violations.
The good news: The new law puts all dealers (large and small) on a level playing field and attempts to weed out “bad actors.” Conversely, dealers who institute compliance procedures will be able to compete fairly with each other. Low-cost compliance software is available for dealers to avoid complex pitfalls. Dealers who do not comply are destined to be driven out of business by consumer lawsuits and possibly by DMV enforcement.
Below is only a summary of some of what’s coming and only at a very high-level. Each section has may compliance details which affects your dealership procedures and processes. Used vehicle dealers in particular, should begin preparing NOW!
We’ll be sharing practical guidance, tools, and compliance resources, section by section, over the coming months to help our member dealers prepare for these changes.
If you’d like to discuss how these laws may affect your dealership specifically, you can schedule a consultation with our legal team HERE
THE MOST IMPORTANT NEW LAWS FOR CALIFORNIA CAR DEALERSHIPS
SB 766 – The California CARS Act (MOST CRITICAL)
Effective: October 1, 2026
Applies to: Retail light-duty vehicle sales (used vehicles are heavily impacted)
Enforcement Exposure: Unfair Competition Law (UCL) and Consumer Legal Remedies Act (CLRA)
1. Mandatory 3-Day Right to Return (Used Vehicles)
For the first time, California will impose a statutory return policy on used vehicle sales.
Key rules:
• Applies to used vehicles priced at $50,000 or less
• Buyer has 4 business days from the sat of sale to return the vehicle
• Dealers can only charge a restocking fee:
- 1.5% of purchase price
- $200 minimum / $600 maximum
• Mileage limits:
- Up to 400 miles
- $1 per mile over 250, capped at $150
This represents a fundamental shift in risk allocation, moving return risk squarely onto the dealer.
2. “Total Price” Advertising & Disclosure Requirements
Dealers must now disclose the true total price much earlier in the sales process.
What’s required: •
“Total price” must appear: (You can no longer say “Call for Price” if a specific vehicle is advertised)
- In all advertising
- In the first written communication with a consumer and record must be kept for two years. Salespersons should no longer text consumers with their own cell phones where records may be lost if the salesperson leaves.
• The tax, license, and doc fee may be excluded—but almost nothing else can
• For new cars, MSRP alone is not sufficient
• Listings must be removed promptly once a vehicle becomes unavailable. (48 hours)
Pricing errors will no longer be marketing issues—they will be compliance violations.
3. Strict Limits on Optional Products
SB 766 directly targets optional products that do not provide a real, lawful benefit to the consumer. Products that may no longer be sold include:
• Nitrogen tire programs under 95%
• GAP products that do not comply with California law
• Service contracts voided by pre-existing conditions
• Oil changes sold for EVs
• Paint protection products that void factory warranties
Used-car F&I menus—especially for subprime or older inventory—will face increased scrutiny.
4. Expanded Record Retention Requirements (Minimum 2 Years)
Dealers must retain extensive documentation, including:
• Advertisements and price communications, even if a sale is not made.
• Signed deal jackets and customer communications even after sale.
• Proof that optional products provided a legitimate benefit
• Return transactions and refunds
• Written customer complaints
Expect audit-style enforcement—not just complaint-driven investigations.
OTHER NOTABLE CALIFORNIA LAWS (Lower Impact for Used-Only Dealers)
• SB 26 – Lemon Law opt-out provisions (largely OEM-driven)
• AB 483 – Early termination fee restrictions (limited auto impact)
• SB 82 – Arbitration limitations (check with F&I providers)
• DMV enforcement – Continued focus on late title transfers
• Prop 65 updates – Compliance deadline January 2028
• SB 446 – Expanded privacy and data breach requirements for customer and employee data
HOW THESE CHANGES WILL IMPACT USED CAR DEALERS
Expect meaningful shifts in day-to-day operations, including:
• Increased financial and legal risk per transaction
• Higher compliance and documentation costs which will lead to higher vehicle costs
• Pressure on F&I revenue
• Increased attention to the buyer and evaluating the buyer for risky behavior.
• Required behavioral changes in the sales process
• Availability of legal counsel on an ongoing basis to help with tricky situations.
Bottom-Line Takeaways
The big picture:
California is moving towards a retail-style return model for used vehicles. At the same time, dealers and their staff must take steps towards complying with the law and establishing verifiable processes and records ahead of time, as technical violations are sure to invite plaintiff’s attorney’s and consumer lawsuits. This places significantly more risk on used car dealers with every sale.
The strategic reality:
We expect that used car prices will increase as Dealers implement cost increasing operational and compliance procedures. Dealers who adapt early—by employing AI driven solutions and specialized software will be far better positioned to survive and compete in this new environment.
