Full Breakdown
California's New Car-Buying Laws: A Comprehensive Overview
12/30/2025, 8:19:50 AM
Major Reforms in Car-Buying Regulations
In 2025, California enacted significant changes to its car-buying laws, notably through the Combating Auto Retail Scams Act, or CARS Act. This legislation introduces a three-day return policy for used vehicles purchased through licensed dealerships, allowing buyers to return a vehicle for a full refund without needing to provide a reason, provided the vehicle's purchase price is under $50,000. The law also mandates that dealers disclose the actual price of vehicles and financing terms upfront, aiming to enhance transparency in the car-buying process.
Key Features of the CARS Act
The CARS Act, signed by Governor Gavin Newsom, is designed to empower consumers and make car purchases more affordable. Rosemary Shahan, president of Consumers for Auto Reliability and Safety, emphasized the historic nature of the law, stating, “It’s going to make cars more affordable.” The law applies to used cars that have driven less than 400 miles since purchase and are returned in undamaged condition. However, buyers must pay a restocking fee ranging from $200 to $600, depending on the vehicle's price.
Additionally, the law prohibits dealers from charging for unnecessary add-ons, such as oil changes for electric vehicles, and requires them to maintain documentation related to advertisements and contracts for at least two years.
Legislative Background and Context
These reforms come in response to previous legislation that weakened California's lemon law, which governs the rights of consumers to seek refunds for defective vehicles. In 2024, lawmakers passed a bill that reduced the time frame for consumers to sue under the lemon law from the vehicle's entire warranty period to just six years. This change was influenced by lobbying from major auto manufacturers like General Motors and Ford, who faced numerous lawsuits. In response, Newsom signed Senate Bill 26 in 2025, allowing manufacturers to opt out of the weakened lemon law provisions.
Industry Reactions
The California New Car Dealers Association expressed frustration over the new responsibilities imposed by the CARS Act. Brian Maas, the association's president, noted that while the law enhances transparency, it also increases the burden on dealers. He criticized Newsom's veto of a bill that would have allowed dealers to raise document-processing fees, which he argued was necessary given the new requirements.
Criticism and Opposition
Despite the positive reception from consumer advocates, there are concerns regarding the implications of the new laws. Critics argue that the restocking fees could deter some buyers from taking advantage of the return policy. Additionally, the disparity in lemon law protections based on the manufacturer may create confusion among consumers.
Conclusion: Implications for California's Auto Market
The CARS Act represents a significant shift in California's approach to car buying, aiming to enhance consumer protections and transparency. As the law takes effect in October 2026, it is expected to reshape the auto market landscape, potentially leading to further legislative battles as stakeholders navigate the implications of these reforms.
