On October 6, 2025, Governor Gavin Newsom signed into law Senate Bill 766 — the California Combating Auto Retail Scams (CARS) Act. Taking effect on October 1, 2026, this legislation represents one of the most comprehensive reshapings of California’s retail automotive sales and leasing practices in decades.
A State-Level Successor to the FTC’s “CARS Rule”
The CARS Act is California’s response to the Federal Trade Commission’s now-invalidated Vehicle Shopping Rule (CARS Rule), which the Fifth Circuit Court of Appeals struck down in February 2025. The federal rule never took effect, but California went ahead and created its own version that captures many of the goals the FTC had with the Vehicle Shopping Rule. However, the final text of the CARS Act includes several positive clarifications and revisions secured through the efforts of the California New Car Dealers Association.
The new law brings far-reaching changes for retail automotive transactions, focusing on transparency, disclosure, and consumer choice. For dealerships, the compliance lift will be significant, but early preparation will go a long way toward ensuring smooth implementation.
This article is a high-level overview of some of the most impactful elements of the CARS Act. Stay tuned for more updates and compliance guidance from ComplyAuto in the coming weeks and months as dealers start to prepare for the changes that this new law will require.
Major Provisions and Dealer Obligations
1. Required “Total Price” Disclosure & First Communication Rule
When selling or financing a vehicle, dealers must clearly and conspicuously disclose the vehicle’s “total price” in any advertisement that mentions a specific vehicle for sale, or that includes a monetary amount or financing term for a specific vehicle. They must also make this disclosure in the first written communication that refers to a specific vehicle for sale, or that includes a monetary amount or financing term for any vehicle. This requirement will likely be the most difficult to implement for dealers, as it can be challenging to verify whether a salesperson actually provided the disclosure before sharing any other written communications. Dealers will therefore need a strong internal process to ensure that, before any email, text, document, credit application, or written communication is given to a customer, the total price disclosure has been clearly provided first or alongside it.
This “total price” includes all items installed on the vehicle and price adjustments but excludes taxes and certain fees permitted by law, including the dealer document processing charge (which a separate pending bill would raise from the current $85 cap). Dealers may therefore continue excluding the document processing charge from the advertised total price, which is an important distinction from the proposed FTC CARS Rule. However, the Act no longer permits a distinction for optional add-ons that are pre-installed, such as theft deterrent devices. And advertising based solely on MSRP (with a disclaimer that it does not constitute the advertised price) will no longer be allowed unless the MSRP is the dealer’s actual total advertised price and stated as such.
2. Add-On and Payment Disclosure Requirements
Additionally, if a dealer discusses monthly payments or compares payment options in connection with a sale or lease (such as in a worksheet or payment options overview document), the total amount that the consumer will pay to purchase or lease the vehicle at that payment amount must be disclosed along with a disclosure that lower payments often increase the total amount that a consumer will pay. Finally, any written representation about add-on products or services must include a disclosure that the consumer can purchase or lease the vehicle without the add-on. Fortunately, the law explicitly states that each of these disclosures may be satisfied by adding them to the existing California Pre-Contract Disclosure form that is used by most California dealers today.
Dealers must also retain copies of these written communications and disclosures for at least two years.
3. Add-On Product Limitations
The Act directly targets “junk fees” by prohibiting dealers from charging for add-on products or services that provide no benefit to the buyer or lessee. Examples include nitrogen tire packages with less than 95% purity, GAP agreements that fail to comply with California’s financing laws, service contracts voided by preexisting vehicle conditions, or oil changes for electric vehicles.
If a dealer sells an add-on, it must provide a real, measurable benefit to the consumer. Dealers are also required to keep records demonstrating that the add-ons they sell in fact benefit consumers.
4. The Three-Day Right to Cancel for Used Vehicles & New “No Cooling Off” Signs
Perhaps the most critical change is the creation of a no-charge three-day right to cancel for most retail sales and leases of used vehicles priced at $50,000 or less. Buyers may return the vehicle within three days for any reason, subject to certain conditions, including mileage limits (no more than 400 miles driven, and charges allowed after 250 miles) and payment of a restocking fee between $200 and $600 (but not to exceed 1.5% of the sale price).
The law specifies strict timelines for refunding down payments, returning trade-in vehicles, and processing cancellations. Failure to adhere to these timelines or overcharging a restocking fee constitutes a violation of the Act. If a dealer sells a customer’s trade-in vehicle during the customer’s three-day cancellation period and the customer later decides to cancel the transaction, the dealer must return the greater of the vehicle’s fair market value, the actual cash value (ACV) listed on the contract, or the amount the dealer received for selling the trade-in. Because of this, dealers should carefully evaluate the risk of reselling trade-in vehicles before the cancellation period expires. They may wish to hold (“bullpen”) trade-in vehicles for the full three days or reconsider over-allowing and listing inflated ACVs that could result in financial losses if the customer exercises their right to cancel. This right does not apply to new vehicles, lease buy-outs, auctions, fleet sales, or used vehicles priced above $50,000. This will also require updated signage for the “No Cooling Off” signs that dealers are required to post.
5. Recordkeeping and Retention Duties
Dealers must keep all records showing compliance with the Act for at least two years from when they are created. These records include evidence demonstrating that advertisements and online listings accurately show a vehicle’s total price, copies of all signed purchase, financing, and lease documents and related written communications (even if the deal wasn’t finalized), and documentation supporting that any add-on products—like service contracts or GAP coverage—comply with legal requirements. Dealers must also retain records of cancellation requests, refunds, and trade-in returns, as well as any written buyer or lessee complaints, and inquiries about add-ons and vehicles, and the dealer’s responses.
Implementation and Compliance Outlook
Although the CARS Act does not take effect until October 2026, its impact will reach many facets of a dealership’s operations—from advertising, negotiation, and F&I presentations to disclosure forms and record retention. Dealers should begin reviewing their systems and workflows now to ensure readiness.
Form providers, finance companies, add-on providers, and dealer management software vendors will play an important role in updating standardized sales and lease forms and ancillary transaction documents to meet the new disclosure and cancellation requirements. However, forms alone will not ensure compliance. The CARS Act demands a coordinated approach that combines accurate documentation with consistent staff practices, reliable systems, and ongoing training.
That’s where trusted compliance partners like ComplyAuto come in. As California’s retail automotive landscape shifts under this new law, dealers will need more than templates; they will need technology-driven tools and expert guidance that simplify compliance, automate recordkeeping, and align day-to-day operations with new legal standards. ComplyAuto is leading the industry in software that automates key dealership compliance requirements, and we already have several tools ready (including Guardian and DealCheck Ai), with more under development, to aid dealers’ compliance with the CARS Act requirements.
ComplyAuto will continue to deliver authoritative resources, including webinars, articles, and a comprehensive compliance guide, to help dealerships prepare for implementation and maintain confidence under the new framework required by the CARS Act. By preparing early and partnering with trusted compliance providers, dealerships can turn this period of change into an opportunity to modernize operations and strengthen long-term consumer trust.