The New California CARS Act (SB 766): What Car Buyers Need to Know

Shopping for a new or used car in California should be an exciting milestone. Yet for many, the experience is tainted by confusing pricing, high-pressure sales tactics, and a flood of surprise fees that appear just before signing. California lawmakers have heard these frustrations and are taking action with a landmark piece of proposed legislation: Senate Bill 766, also known as the California CARS Act.

The California CARS (California Assembly Bill for Trust and Security) Act is designed to bring much-needed transparency and fairness to the dealership experience. It targets the deceptive practices that can turn the dream of a new car into a financial nightmare. Understanding this bill is the first step in protecting yourself at the dealership and ensuring you pay a fair, honest price for your vehicle.

What is the California CARS Act (SB 766)?

Proposed by Senator Anthony Portantino, Senate Bill 766 is state-level legislation that mirrors and strengthens the protections found in the federal FTC’s CARS Rule. Its primary goal is simple: to make the price you see advertised the price you can actually pay. The bill aims to put an end to the shell games that have become all too common in the auto sales industry.

At its core, the CARS Act is a consumer protection law focused on the transaction itself. It addresses the advertising, negotiation, and financing stages of buying a car. This makes it a powerful companion to California’s existing lemon laws, which protect you after the sale if the vehicle turns out to be defective. Together, these laws provide comprehensive protection for car buyers from the showroom floor to the repair shop.

The Common Dealership Problems SB 766 Aims to Solve

To appreciate the impact of the CARS Act, it helps to understand the specific problems it was written to fix. Many California car buyers will recognize these frustrating scenarios.

Deceptive Advertising and Bait-and-Switch Prices

You see a car advertised online for an incredible price. You rush to the dealership, test drive the vehicle, and decide to buy it. But when you sit down to do the paperwork, the price on the contract is thousands of dollars higher than what you saw online. The dealer explains that the advertised price didn't include mandatory "dealer prep," "reconditioning fees," or other charges. This classic bait-and-switch tactic is a primary target of the CARS Act.

The Plague of Hidden "Junk Fees"

Junk fees are charges for products or services that have little to no value, or that are added to your bill without your clear consent. These are often pre-printed on sales forms to make them seem standard and non-negotiable.

Common examples include:

• Dealer "Doc Fees" or "Prep Fees": Excessive charges for paperwork processing or getting the car ready for sale, tasks that are simply part of the cost of doing business.
• Bogus Add-Ons: Charges for nitrogen-filled tires (often just regular air), minor anti-theft window etching, or fabric protection that may have already been applied at the factory.
• Forced Products: Requiring a buyer to purchase GAP insurance or an extended warranty to get a specific vehicle or a certain financing rate.

These fees can add thousands of dollars to the final price of a vehicle, turning a good deal into a very expensive one.

Opaque Financing and Monthly Payment Games

Some dealerships focus negotiations solely on the monthly payment. A salesperson might ask, "What monthly payment can you afford?" If you say "$500," they can structure a loan to meet that number by extending the loan term to 84 or even 96 months. While the payment is affordable, you end up paying thousands more in interest over the life of the loan. The CARS Act seeks to bring clarity to the total cost of financing, not just the monthly payment.

How the CARS Act (SB 766) Protects California Consumers

The California CARS Act introduces several powerful requirements for dealerships that directly combat the problems listed above. These new rules are designed to put you, the consumer, back in the driver's seat.

The "Offering Price" Mandate

This is the cornerstone of the bill. The CARS Act will require dealers to advertise the "offering price" of a vehicle. This is the legitimate, full price for which the dealer will sell the car to any customer.

The offering price must include all charges and fees, except for required government charges like sales tax, registration fees, and title fees. This means the price you see must include any dealer-installed accessories, reconditioning fees, and other costs rolled into the vehicle's total cash price. A dealer cannot advertise a car for $30,000 and then add a $1,500 "market adjustment" or a $995 "dealer prep" fee at the closing table.

Prohibiting Products with No Value

The Act will make it illegal for a dealer to charge for any add-on product or service that provides no actual benefit to the consumer. This includes charging for a duplicative warranty that covers the same things as the factory warranty or charging for a "theft-deterrent" system that offers nothing more than a sticker on the window.

Requiring Express, Informed Consent for All Add-Ons

Under SB 766, dealers cannot simply bundle add-ons into the price of a car. For any optional product like an extended service contract, GAP insurance, or paint protection, the dealer must:

1. Clearly state that the product is optional and not required to purchase the vehicle or obtain financing.
2. Disclose the price of the add-on separate from the vehicle's offering price.
3. Obtain your explicit, written consent to purchase that specific add-on.

This prevents a dealer from sneaking a $2,000 service contract into your financing without you fully understanding what you are buying and agreeing to it.

Strengthening Record-Keeping Requirements

The bill will require dealers to keep detailed records of all transactions for at least two years. This includes advertisements, price lists, communications with customers, and signed sales contracts. This paper trail is invaluable if a dispute arises later, as it provides clear evidence of what was offered, negotiated, and agreed upon.

How the CARS Act and Lemon Law Work Together

While the CARS Act is a monumental step forward for fairness in car sales, it is important to understand its relationship with California's strong lemon laws, which govern the car's performance after the sale. Think of them as two different shields protecting you at different stages of car ownership.

The CARS Act (SB 766): Protects you from deceptive practices during the purchase process. It ensures a fair and transparent transaction.

The California Lemon Law: Protects you if the vehicle you purchased has substantial defects that the manufacturer cannot repair after a reasonable number of attempts.

The primary lemon law in California is the Song-Beverly Consumer Warranty Act (Cal. Civ. Code sections 1790-1795.8). This powerful law requires manufacturers to stand by their warranties. If you buy or lease a new car that turns out to be a lemon, the manufacturer must either replace it with a new one or repurchase it from you.

What Makes a Car a "Lemon"?

A vehicle is presumed to be a lemon under the Tanner Consumer Protection Act (Cal. Civ. Code section 1793.22) if, within the first 18 months or 18,000 miles, one of the following occurs:

• The manufacturer or its authorized dealer has made four or more attempts to repair the same substantial defect.
• The manufacturer or dealer has made two or more attempts to repair a defect that is serious enough to cause death or serious bodily injury.
• The vehicle has been out of service for repairs for a cumulative total of more than 30 days.

A "substantial defect" is any issue covered by the warranty that impairs the vehicle's use, value, or safety. This can range from a faulty transmission or engine failure to persistent electrical problems or a malfunctioning infotainment system.

A Powerful Combination for Consumer Rights: A Scenario

Imagine this scenario:

1. The Purchase: You go to a dealership to buy a new electric SUV. Thanks to the CARS Act, the advertised price of $55,000 is the real price. The dealer offers an optional battery protection plan for $2,500, but you decline in writing, and the dealer proceeds with the sale without pressure. You drive off the lot feeling confident that you paid a fair price.
2. The Problem: Two months later, the SUV’s battery begins to fail, leaving you stranded twice. The dealer attempts a software fix, but the problem persists. Over the next six months, the car is in the shop for a total of 35 days across three separate repair visits for the same battery issue.
3. The Remedy: The CARS Act protected you during the sale. Now, the California Lemon Law protects you from being stuck with a defective vehicle. Because your SUV has been out of service for over 30 days and has had multiple repair attempts for a serious safety issue, you have a strong lemon law claim. Under the Song-Beverly Act, you are entitled to a buyback, where the manufacturer refunds your down payment, monthly payments, and registration fees, and pays off the remainder of your loan.

This example shows how these laws work hand-in-hand to provide comprehensive protection. The federal Magnuson-Moss Warranty Act (15 U.S.C. sections 2301-2312) adds another layer of federal protection, ensuring that consumers who win their warranty disputes can also recover attorney's fees.

Frequently Asked Questions about the CARS Act

Is the California CARS Act (SB 766) law yet?

As of early 2024, SB 766 is a proposed bill working its way through the California legislative process. While it is not yet law, it has strong support and reflects a significant shift toward greater consumer protection. Its provisions are very similar to the federal FTC CARS Rule, which is set to take effect, so many dealerships are already preparing to comply with these new standards of transparency.

How is this different from the federal FTC CARS Rule?

The California CARS Act is state-level legislation that largely codifies and strengthens the protections of the federal CARS Rule specifically for California consumers. Both aim to eliminate bait-and-switch tactics and junk fees. Having a state-level law like SB 766 gives California consumers and state enforcement agencies a more direct and powerful tool to hold dealerships accountable within the state's legal system.

Can a dealer still sell me optional add-ons like an extended warranty?

Yes, but the process will be much more transparent. The CARS Act does not prohibit the sale of legitimate, optional products. It simply requires that the dealer clearly disclose that the product is optional, state its price separately, and get your express consent before adding it to the deal. You will have a clear choice, free from pressure or deception.

Does the CARS Act apply to used cars?

Yes. The protections in SB 766 apply to the sale of both new and used vehicles sold by licensed car dealers in California. This is critical, as deceptive practices can be just as prevalent, if not more so, in the used car market. Additionally, newly passed law AB 1755 (2024) will also enhance used car history disclosures, working in concert with the CARS Act to protect used car buyers.

You Have Rights. We're Here to Protect Them.

The California CARS Act represents a welcome and necessary change, arming consumers with the tools for a fair fight at the dealership. But even with these new protections, disputes can still arise. And if your new or used car starts showing signs of being a lemon, you need an experienced advocate on your side. Whether you were tricked by deceptive pricing or are now dealing with endless repair appointments, you don't have to face the dealership or the manufacturer alone.

At LemonLaws.com, our focus is on upholding consumer rights. If you believe you were a victim of dealership fraud or if your vehicle is chronically defective, we invite you to contact us for a free, no-obligation consultation. Our attorneys can help you understand your rights under both the CARS Act and California’s Lemon Law. Thanks to the consumer-friendly fee-shifting provision in the Song-Beverly Act, California Civil Code section 1794(d), we are paid by the manufacturer if we win your case. This means you pay no out-of-pocket fees for our services. Let us help you get the justice you deserve.