At a time when consumers are facing record-high prices for new and used cars, and President Trump’s tariffs are predicted to cause the price of cars to skyrocket even higher, California is fighting back. It has received little attention outside the Capitol in Sacramento, but California is close to passing sweeping first-in-the-nation legislation to make buying a new or used car more affordable and less risky.

For months, car dealers and auto lenders attempted to kill SB 766, the California Combating Auto Retail Scams (CARS) Act, authored by Senator Ben Allen (D-Santa Monica / Torrance / Malibu). But the senator and a large coalition of pro-consumer organizations advocating for the bill persisted. Democratic legislators overwhelmingly voted for the bill. In August, California Attorney General Rob Bonta, who led a coalition of 19 state attorneys general in support of the FTC’s CARS Rule,  also submitted a letter of support.

Key provisions of the landmark measure:

• Requiring auto dealers to disclose the “total price” up front and in advertising, making the price of cars more transparent and competitive
• Prohibiting the sale of add-on products and services that would not benefit car buyers, such as lifetime oil changes for electric vehicles or extended service contracts that fail to cover pre-existing conditions like damage from prior wrecks or floods, or mechanical conditions
• Creating a new, first-in-the-nation 3-day cooling off period for used car buyers who purchase vehicles that cost $50,000 or less, including vehicles weighing less than 10,000 pounds that are purchased for business use. Consumers, rideshare workers, and small businesses will be able to return used cars, trucks, and vans for any reason and obtain a refund (minus a restocking fee) without having to take the dealer to court or submit to arbitration, which can drag out for a year or more.

SB 766’s price transparency and prohibition on worthless add-ons are modeled after the Federal Trade Commission’s Combating Auto Retail Scams (CARS) Rule, a federal rule issued during the Biden Administration that targeted bait-and-switch pricing, hidden junk fees, and deceptive practices, particularly deceptions aimed at military Servicemembers.

Last year, the agency issued the CARS Rule, to require price transparency and prohibit the sale of worthless add-on products and services.  Based on rigorous economic analysis, the FTC projected that the Rule would save American car buyers $3.4 billion each year, and another 72 million hours otherwise spent shopping and haggling over the price of cars.

Leading economists from Stanford, MIT, Clemson, University of Arizona, and University of Michigan, who crunched the numbers and backed the FTC’s CARS Rule in court, conservatively project that passage of similar provisions in the CA CARS Act 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.

Year after year, auto sales and service complaints top the list of consumer complaints to state and local consumer protection agencies.

Car dealer scams cost victims billions of dollars each year in bait-and-switch pricing, junk fees, and “loan packing” of high-profit items of little or no value

Typical scams the FTC’s Rule was aimed at stopping, described in news releases issued by the FTC:

“FTC and Wisconsin Take Action Against Rhinelander Auto Center for Illegally Discriminating Against American Indian Customers and Charging Unlawful Junk Fees”

“The Federal Trade Commission and State of Wisconsin are taking action against Wisconsin auto dealer group Rhinelander Auto Center, its current and former owners, and general manager Daniel Towne for deceiving consumers by tacking hundreds or even thousands of dollars in illegal junk fees onto car prices and for discriminating against American Indian customers by charging them higher financing costs and fees.”

“Auto Dealership Bronx Honda, General Manager to Pay $1.5 Million to Settle FTC Charges They Discriminated Against African-American, Hispanic Car Buyers. Complaint also alleges deceptive advertising, bogus fees, price inflation and other practices”

“In addition to alleged racial discrimination, the defendants are charged with numerous illegal practices in the advertising and sales process that caused consumers to pay substantially more than they expect. The complaint alleges that the defendants:

• failed to honor advertised sale prices, inflating the cost through a variety of methods;
• changed the sales price on paperwork in the middle of the sale without telling the consumer, a practice the defendants internally referred to as adding “air money” to the contract;
• double-charged consumers for taxes and fees without their knowledge; and  
• told consumers that they had to pay thousands of dollars in unnecessary fees to purchase ‘certified pre-owned’ cars that were not required by that program.”

Fed up with auto rip-offs, consumers, former dealership employees, and honest dealers flooded the FTC with over 25,000 comments in support of the CARS Rule. Many who commented were from California. A few samples:

“Selling cars to the general public has been reduced to a contest of which dealership can effectively lie the best. I fully support the FTC in passing these regulations.” 

“My name is Steven Adler and I reside in Vista, CA. I have purchased numerous vehicles from dealerships in my lifetime. As well, I worked as a vehicle sales person for a number of years. I left the industry due to the corrupt practices of the dealerships that I worked for. I saw people cheated, treated poorly, and taken advantage of many times over. The system in its current design MUST change, so that it provides more transparent, equitable and fair business practices. I therefore strongly support the FTC in its bid to create a more level playing field for automobile shoppers and buyers. Thank you.”

“I was looking for a new chevy bolt ev and I was looking online for availability when I talked to the dealerships and this was most in southern California they had additional fees and markups from $3000 to $10000 over msrp. I’ve seen new and used cars so overpriced I no longer can afford to drive because I’m not going to overpay. I work too hard to do that. Average cars cost more than I make in a year — disgusting!”

“I have gone to a dealership and negotiated the price of a car with the salesperson. Then when I got back into the finance area to sign the papers.. the price for the car was suddenly higher. They would not drop the extra things they added to the car and it was a scam. It wasted my time and was a lot of pressure to get out of the bad deal. They should not be able to do that to customers.”

“I am a California resident and am pro this regulation, I’ve gone to buy cars and seen this stuff happen all the time and wish it was illegal. Without these regulations we’re just destroying good honest dealers and promoting the shady ones.”

As expected, car dealers and lenders sued the FTC in the 5th Circuit (covering Texas and Louisiana). While the case was pending, the Rule was put on hold. Groups filed amicus briefs in support of the rule, including consumer groups, economists, leading organizations that represent U.S. military servicemembers, veterans, and their families, and the attorneys general of 20 states, including California.

However, before it could take effect, the Rule was overturned in a 2-1 split decision, on procedural grounds — not on the merits.

Under the Trump administration, the FTC has not re-issued the Rule. Dealers and lenders thought they had won. They expected to be able to continue scamming car buyers billions of dollars in junk fees and other hidden costs.

But — California is now on the brink of passing its own version of the CARS Rule, in the nation’s largest auto sales market.

SB 766 has already passed out of the full Senate and all of the policy committees in the Assembly. UPDATE: On Sept. 9, SB 766 passed on the Assembly Floor.

At the final hearing on the bill, after they won many changes to the bill in their favor, car dealers and auto lenders dropped their opposition. The bill has some flaws and will need a tune-up to address shortcomings in the cooling-off period. But — it will still be the most sweeping overhaul of consumer protections for car buyers in the nation.

If it passes in the Legislature and is signed by Governor Gavin Newsom, SB 766 will take effect on October 1, 2026, and help empower car buyers such as William Bradley, who lives with his family in Lincoln, CA, from being victimized by unscrupulous car dealers. He testified for SB 766 before the Senate Judiciary Committee about his nightmare car buying experience. According to Mr. Bradley:

“Last year, on April 2^nd, my wife and I went to check out a 2003 Subaru Baha at an independent auto dealership in Roseville. I looked it over carefully, including taking a look underneath, and saw nothing that set off any alarms. Some undercoating was visible, but it appeared to have been a preventative measure against rust.

I asked the salesperson about the condition of the car and its history, and he said it had recently passed a safety inspection. He specifically said they had inspected it for rust, since the Carfax report said it came from Pennsylvania, and it checked out OK.

I took him at his word, since he’s a professional and in a position to know about the car. I paid $10,500 in cash. As soon as I could, I took it to an independent mechanic who hoisted it up on a lift. Initially my mechanic believed the car looked clean and was impressed with the low mileage.

However, after he looked closer, we were both shocked at what he found. The entire undercarriage was severely corroded due to rust. The rust was covered up by an extremely heavy layer of undercoating over top of duct tape, to hide the damage. Brake components, steering, suspension and frame were rusted beyond repair. 

He warned me not to drive it at all, since it was grossly unsafe.

I took the car to a major franchised new car dealership for a second opinion, and they told me the same thing. They couldn’t even use a hoist, because the frame began to bow and crumble.

I contacted the dealership where I bought the car and they told me too bad, I bought the car “AS IS,” so basically I was stuck. I finally ended up having to sue the dealer just to get a refund. Over a year later, the case is still pending. Meanwhile, I’ve had to borrow cars just to get to work. This whole experience has been a serious hardship for myself and my family and delayed our plans to buy our first home.

If SB 766 were the law, I could have taken the car back for a refund without having to sue. Used car buyers like me shouldn’t have to file a lawsuit just to get a refund for a bad used car deal.”

The cooling off period in SB 766 gives CA used car buyers a new right to return the vehicle for any reason. But there are limitations:

• The vehicle’s total price must be $50,000 or less.
• The vehicle must be returned to the selling dealership within 3 calendar days, unless the dealership is closed on the 3rd day, and then the period is extended until the next day the dealership is open.
• When it is returned, the vehicle must be in the same condition, except reasonable wear and tear and any defect or mechanical problem that becomes evident and that you did not cause.
• The vehicle cannot be driven more than 400 miles.
• Dealers are permitted to charge $1 per mile for miles driven over 250 miles.
• Dealers can charge a restocking fee or the actual amount of shipping costs, of 1.5% of the price of the car, with a minimum of $200 and a maximum of $600.
• If you traded in a vehicle, the dealer must return the traded-in car and all keys, UNLESS the dealer has sold or “initiated the process to transfer the title of the trade-in vehicle.” If that is the case, the dealer must provide the car buyer a refund that is the greater of:
  • The agreed-upon value of the trade-in vehicle in the sales or lease agreement
  • The amount for which the dealer sold the trade-in vehicle
  • The fair market value of the trade-in vehicle

• Caution: If you trade in a vehicle before you have paid off the loan, then you still owe money that car dealers usually roll into the next transaction, adding to your debt. If you return the car you just bought or leased, the dealer can charge you for the amount you owed when you traded in your car, known as “negative equity.” Currently, the average amount of negative equity is around $6,000. That means many car buyers who have negative equity will not be able to afford to use the cooling off period.

VIDEO of hearing, debate and vote on SB 766 (Allen) in CA Assembly Committee on the Judiciary July 1, 2025

VIDEO of hearing, debate and vote on SB 766 (Allen) in CA Assembly Committee on Privacy and Consumer Protection July 16, 2025