California CARS Act Checklist for Dealerships

California's CARS Act has been in effect since October 1, 2026. It reaches the advertised price on your website, the first written response your BDC sends, the menu in the F&I office, and the records in the back office. Here's what changed and who owns which piece.

And if you’d like an in-depth checklist for every detail to be compliant with the California CARS Act, use KPA’s checklist.

What Is the California CARS Act and Who Does It Apply To?

The California Combating Auto Retail Scams (CARS) Act, SB 766, is a consumer protection law for retail vehicle sales and leases. It was signed on October 6, 2025, took effect October 1, 2026, and is codified mainly in the California Civil Code beginning at Section 1784.20. . The focus remains on areas we are all familiar with: hidden fees, advertised prices that consumers cannot actually obtain, add-on products that provide little to no value to the consumer, and disclosures that are unclear or difficult to understand.

It applies to licensed California dealers selling or leasing new and used light-duty vehicles (under 10,000 pounds GVWR) at retail; this includes powersports and certain Recreational vehicles If you run multiple rooftops,, confirm which locations and processes are covered rather than assuming. It's one more layer in your auto dealership compliance management.

Retail Sales Versus Exempt Transactions

Wholesale deals, fleet sales of more than one vehicle in a single transaction, sales to commercial purchasers buying five or more vehicles a year for business, and vehicles that aren't required to be registered fall outside the Act. A small business buying a single truck is still a covered retail sale. Used vehicles sold at auction are Exempt.

What Changes for Advertising, Sales, and F&I?

The Act touches every department that communicates with a customer before the contract is signed. Here's how the main requirements break down.

Total Price and First Written Communication Rules

California's Total Price is the full sale price minus a defined list of items: taxes, government registration fees, th, certain smog certificate fees , and finance charges. It must include any dealer price adjustment and any Items already installed, like a tow hitch. Rebates can be advertised separately but can't be deducted from the total price, and "call for price" doesn't satisfy the rule for a specific vehicle.

Watch the federal layer, too. California law currrenlty allows for the doc fee and EVR Fee to be left out of Total Price, but the FTC takes the position that even if a state law permits excluding the doc fee and other pass through fee’s, they should be included in the most promient advertised price. any Where the two standards differ, building to the stricter one is the safer default. More on state vs federal dealer compliance.

Add-On Products That Need Stronger Scrutiny

The Act bars charging for products the buyer can't benefit from. Examples include oil change packages sold on EVs, nitrogen tire fills below the required purity, catalytic converter marking on a vehicle without one, service contracts void for preexisting conditions, and surface protection that voids the manufacturer's paint warranty. Dealers must also pay the add-on provider within 10 days of signing, unless a later payment arrangement leaves the buyer's coverage unaffected. When a deal is negotiated primarily in Chinese, Korean, Spanish, Tagalog, or Vietnamese, the add-on and cancellation disclosures must be provided in that language.

Misrepresentations That Create Immediate Exposure

Any material misstatement about price, availability, financing or lease terms, add-on costs and benefits, trade-in payoffs, or credit application information is a violation. These are the easiest violations to prove, because they usually live in a text, an email, or a signed form. Customers can't waive the Act's protections, so a signed waiver won't help.

How Should Dealerships Prepare for the 3-Day Right to Cancel?

The Act replaced the old paid two-day contract cancellation option with a free right to cancel for qualifying used vehicles. If the old option is still on your menu or in your forms software, pull it.

Used Vehicle Eligibility and Cancellation Limits

The right covers used vehicle purchases and leases priced at $50,000 or less. It doesn't apply to new vehicles, motorcycles, or a lessee buying the vehicle they already have (LBO’s). The buyer has three days after taking physical delivery to return the vehicle in its original condition, apart from normal wear. The right ends if the vehicle has been driven more than 400 miles. Dealers may charge a restocking fee of 1.5% of the price (minimum $200, maximum $600), plus $1 per mile over 250 miles, capped at $150.

Trade-Ins, Refunds, and Contract Unwind Risk

Once a buyer cancels, the dealer has 48 hours to cancel the contract and issue a full refund. If the trade-in has already been sold, the buyer gets the greatest of the contract value, the actual sale price, or fair market value. That puts real pressure on the back office. Coordinate trade-in payoffs and wholesale timing with the cancellation window in mind, know who can issue a refund on every day the store is open, and keep the signed cancellation disclosure in every qualifying deal jacket. Three separate disclosures are required: a posted notice in 36-point type, a standalone cancellation disclosure, and a notice on the first page of the contract.

California CARS Act Checklist by Department

• Marketing and BDC: Show the total price in every ad for a specific vehicle and in every first written response. Pull sold listings within 48 hours, and keep first written communications and advertising for two years.
• Sales: Use approved language for availability, pricing, and add-ons. Make sure written payment quotes show the total of all payments and any down payment or trade-in they assume. If Add on’s are being presented on written payment quotes Optionality disclosure would also be necessary.
• F&I: Disclose every add-on as optional, out loud and in writing. Remove non-beneficial products from the menu, retire the old cancellation option, pay providers within 10 days, and keep translated disclosures on hand.
• Office and title: Build a 48-hour refund process, document trade-in valuation on cancellations, and file every cancellation request with proof of refund.
• Compliance and training: Train every customer-facing role on the new rules. Audit forms and a sample of deal jackets against the Act on a regular schedule.
• Executive oversight: Name an owner for CARS Act compliance at each rooftop, review audit results, and hold every store to one standard that also accounts for federal pricing guidance.

How Can Dealerships Stay Audit Ready?

The Act requires keeping these records for two years from the date each is created: total price ads and listings, first written communications, signed purchase and finance or lease documents with related written communications, add-on records (including proof of on-time provider payment), cancellation requests with proof of refund and trade-in return, and written complaints and inquiries along with your responses.

That's on top of existing DMV and finance contract retention rules, which run longer, so default to the longest period that applies to each document. Centralize these records now, so pulling one deal's history takes minutes instead of a week.

How KPA Supports California Dealership Compliance

The CARS Act rewards consistency: the same price, the same disclosures, and the same records at every rooftop. KPA connects compliance from the first ad to the signed deal jacket, with software, consulting, and training working from the same record, so a dealer group can see which store is behind before a customer or regulator points it out. Learn more about our advertising, sales, and F&I compliance.

Want to know how your California deal jackets would hold up? We'll review a sample against the Act and tell you what we find and what to fix first, so the buyer who changes their mind on day two gets their money back on time. Get in touch with the KPA team today.