Wirtz Law Blog

Recently, California Governor Gavin Newsom signed the California Combating Auto Retail Scams (CARS) Act. The law offers consumer protections for California auto buyers. It’s expected to create significant changes in how people buy autos in the state – and the information automakers must provide in a sale.

More information can help buyers choose reliable vehicles. When a car has persistent problems, however, owners still have rights under California’s lemon law. An experienced lemon lawyer can help you understand these rights and seek compensation. 

What is the CARS Act?

The California Combating Auto Retail Scams (CARS) Act sets new standards for vehicle sales in California. The law covers both new and used car sales. 

The CARS Act contains several new standards and requirements for dealers – all of which are aimed at making car purchases easier and more transparent for buyers. The Act stands to radically reshape how automakers do business in one of the US’s largest vehicle markets. 

California’s CARS Act is inspired by, and modeled after, a federal regulation adopted by the Federal Trade Commission (FTC) in early 2025. That regulation was later nullified by a federal appeals court; to date, the Trump Administration has not displayed interest in reviving the federal standard.

The CARS Act takes effect in October 2026. Automakers and dealerships have approximately ten months to adapt their existing systems to meet the standards set by the new law. 

New Standards for Vehicle Sales in California

Under the CARS Act, dealerships and automakers are held to several new standards. These standards affect how vehicle buyers understand and navigate the purchasing process. 

Key standards included in the new law include:

No misrepresentation of key facts. Dealers may not misrepresent essential facts about a vehicle sale, lease, or financing. Ads and vehicle quotes must include clear information about the total vehicle price. Dealers have to disclose the full price in writing when a buyer first asks about a car – not when they’ve already gotten the buyer deep into negotiations and paperwork. This price must include all non-optional features and the cost of transporting the vehicle from the plant to the dealership. 

No charging for add-ons that don’t benefit the buyer. Dealers may not charge for add-ons that don’t provide any benefits to the buyer. If an add-on is optional, dealers must tell the buyer that the add-on isn’t required. Common optional add-ons include GAP insurance and service contracts. 

Longer payment period for add-ons. Currently, dealerships collect payment for add-on products and services at the time of sale. Under the new rules, buyers have ten days to pay for the add-ons. 

New three-day return rule. The CARS Act allows a buyer three days from the purchase date to return a used car. The car’s cost must be under $50,000, and the vehicle must be undamaged and driven no more than 400 miles. Dealerships can charge a restocking fee, but this fee is subject to specific limits. California is the first US state to implement such a rule. 

New dealer compliance requirements. Dealerships must meet new compliance measures under the CARS Act. These include retaining certain documents for at least two years. 

The CARS Act and Your Lemon Law Rights

The CARS Act is the product of several months of research and examination of auto retail practices in California. Several factors combined to push legislators to create the new rules. 

One factor that encouraged the creation of the CARS Act involved efforts by auto industry lobbyists to weaken the state’s lemon law protections for consumers, at precisely the same time lemon law filings were increasing in California courts. In 2023, over 22,000 lemon law claims were filed in the state’s courts, up from just 15,000 a year earlier.

Lemon lawsuits jumped significantly in some of the state’s busiest counties. In Los Angeles County, nearly 10 percent of all civil lawsuits filed in 2024 were lemon law cases.

An increase in lemon law cases pointed to serious issues in the automotive manufacturing and sales industry. The CARS Act seeks to address some of those issues by requiring dealers to be upfront about costs, share information more freely, and retain records for at least two years. 

Even when the CARS Act takes effect, some auto buyers may find themselves with a vehicle whose issues persist, even after multiple repair attempts. These owners still have rights under California’s lemon laws. Speak to an experienced lemon law attorney today if you’re dealing with a defective vehicle.