California is poised to enact sweeping changes to its automobile retail landscape that will shift the balance of power toward consumers in one of the most contentious areas of everyday commerce: buying a used car.
Lawmakers in Sacramento and Governor Gavin Newsom have approved legislation known as the Combating Auto Retail Scams Act, or CARS Act, a package of reforms designed to stamp out deceptive sales practices and give buyers stronger protections when they walk off a lot with a preowned vehicle.
The centerpiece of the new law is a mandatory three-day return policy for used vehicles purchased from licensed dealerships. Beginning October 1, 2026, consumers in the Golden State will be able to bring back a used car they have just bought for any reason within three days and receive a refund. This applies to vehicles priced under $50,000, that have been driven fewer than 400 miles, and that have not sustained new damage during the short ownership period.
A Three-Day Safety Net
Under prior California statute, buyers had no automatic right to return a used vehicle after signing the sales contract and driving off the lot. There was an optional contract cancellation right available for limited categories of vehicles under the Car Buyer’s Bill of Rights, but that system was seldom used because it required a separate fee and restrictive conditions.
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The CARS Act replaces that patchwork with an automatic cooling-off period that consumer advocates have long sought. Supporters say the change acknowledges the reality that most buyers cannot fully assess a vehicle’s condition during a few minutes of inspection at a dealership, and that many feel pressured by high-stakes negotiations into deals they later regret.
A mandatory refund right gives buyers time to arrange independent inspections, discover hidden problems, and avoid being stuck with a car that turns out to be mechanically flawed or otherwise unsatisfactory.
Critically, dealers will be allowed to charge a restocking fee as compensation for handling and administrative costs. This fee is capped and structured to match the price of the vehicle, typically ranging from $200 to $600 depending on the purchase price. Some implementations also include modest per-mile charges if the buyer exceeds minimal usage thresholds, though total charges remain capped.
Beyond the Return Window
The law also digs deeper into pricing transparency and fair marketplace practices. Dealers will be required to disclose total prices and financing terms clearly, including any add-on products or services. Optional products such as gap insurance, extended warranties, and other dealer-installed packages cannot be bundled silently into the purchase without clear consent.
Buyers will have up to 10 days after the sale to decide whether to purchase optional add-ons rather than being forced to accept them at the point of sale.
To bolster enforcement, the legislation mandates that dealerships retain all sales, advertisement, contract, and optional product documentation for at least two years. Regulators will be able to audit and review records to help identify patterns of misconduct and pursue enforcement against non-compliant dealers.
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Industry reaction has been mixed. Consumer advocates and watchdog groups have lauded the measure as a historic step forward in consumer protection, arguing that it brings automobile retail in line with other high-value purchase protections and restores trust in a market rife with complaints. Used cars have long been a frequent source of grievances for buyers who pay tens of thousands of dollars only to discover issues that were never disclosed.
Some dealers, however, warn that increased compliance costs and tighter restrictions could raise operating expenses and potentially push up prices. They also contend that the law could be exploited by buyers who take advantage of the refund window for reasons unrelated to defects, although the mileage and condition constraints are designed to limit such abuses.
Still, the California law is likely to be watched closely by other states and perhaps considered as a model for broader national policy. With consumer protection measures increasingly visible in other sectors of retail, personal finance, and digital commerce, the CARS Act positions California as a frontline battleground in the ongoing effort to balance market freedom with consumer rights.