California Car Buyers Bill of Rights
Frequently Asked Questions
California’s new Car Buyers Bill of Rights provides both new and used car buyers with important new rights. But it also has potential pitfalls. If you know your rights, you can avoid the pitfalls.
Here are some FAQs to help you make the most of the new law.
Important note: These FAQs are an overview of the Car Buyer’s Bill of Rights—NOT legal advice. If you need legal advice, please consult an attorney.
Where can I complain about the new law?
When does the new law start?
What vehicles are covered by the new law?
What vehicles are excluded by the new law?
What are the major changes in the new law?
What cars are covered by the two-day return option?
What cars are excluded from the two-day return option?
Doesn’t California law already have a cooling
off period for cars?
Do some dealers already offer a cooling off period?
How much can the dealer charge for the return option?
Do I have to pay the maximum fees for the return option?
What if the car breaks down?
How far can I drive the car before I return it?
Can I return the vehicle for ANY reason?
What about the car I traded in?
When can I get my traded-in car back?
What do I need to do to return a car?
What is Loan Packing?
What items get packed into auto loans?
How much does “loan packing” cost car
buyers?
How can I avoid becoming a victim of loan packing?
What is a “certified” car?
Are “certified” car warranties worth the
extra charges?
What is a credit score?
What is a dealer “markup”?
How can I get the best interest rate?
What if the dealer tries to re-do the deal?
Where can I find a good mechanic?
What other laws protect California car buyers?
What’s the history of the Car Buyers Bill of Rights?
Is the new law a model for other states?
Where can I read the new law?
Call or e-mail the lawmakers in Sacramento who decided how the new law was written. If they hear from enough California citizens, they may decide to improve the law for consumers. They are:
E-mail: http://www.govmail.ca.gov/
E-mail: Assemblymember.Nunez@assembly.ca.gov
E-mail: Senator.Perata@sen.ca.gov
Send a copy of your e-mail message to CARS: stopscam@earthlink.net We’re actively monitoring compliance with the new law. We need to hear from you about your experiences so we can alert lawmakers and the media and get the law changed for the better.
When does the new law start? (back
to index)
July 1, 2006. If you bought a car before that date, you are not protected by the new law. However, you already have many rights under other California laws, including the lemon law, federal warranty laws, the Uniform Commercial Code, the Consumer Legal Remedies Act, the Vehicle Code, and statutes that forbid fraud.
What vehicles are covered by the new law? (back
to index)
Motor vehicles purchased in California from a licensed auto dealer for personal, family, or household use, including cars, minivans, SUVs and pickup trucks.
What vehicles are excluded by the new law? (back
to index)
The new law does NOT cover private sales between individuals, leased autos, vehicles purchased or registered in another state, commercial vehicles, recreational vehicles, or motorcycles.
What are the major changes in the new law? (back
to index)
For used cars only:
For both new and used cars:
What cars are covered by the two-day return option? (back
to index)
Used vehicles sold by licensed dealers, if the car costs $40,000 or less. This includes “As Is” sales, or sales without a warranty. It also includes cars, pickup trucks, minivans, SUVs, and other vehicles bought for personal, family, or household purposes.
What cars are excluded from the two-day return option? (back
to index)
Private sales, recreational vehicles, motorcycles, leased autos, commercial vehicles, vehicles purchased or registered in other states, or vehicles priced over $40,000.
Doesn’t California law already have a cooling off period for
cars? (back
to index)
No. California law has never required a cooling off period for cars. In fact, dealers are required to post signs to notify you that you do not have a cooling-off period. They must also include that information in each sales contract. Starting July 1, 2006, you can get a return option for many used cars, but it is optional, and is not automatic.
Do some dealers already offer a cooling off period? (back
to index)
Yes. Some dealerships voluntary offer a cooling-off period. For example, Carmax has a 5-day return policy. Some dealers offer the option at no extra charge.
The amount the dealer can charge for the return option is limited, depending on the price of the car. Shop around and negotiate for a lower charge. Some dealers say they will offer the option for free.
Here’s a chart that shows the maximum amounts dealers are allowed to charge. You are free to negotiate better terms.
Price of the vehicle |
Return option charge |
Restocking fee |
Balance due |
Maximum price covered by law is $40,000 |
Any charge must be deducted from the restocking fee |
This is the maximum the dealer can charge |
Restocking fee minus return option charge |
$5,000 or less |
$75 |
$175 |
$100 |
$5,000 to $10,000 |
$150 |
$350 |
$200 |
$10,000 to $30,000 |
$250 |
$500 |
$250 |
$30,000 to $40,000 |
1% of purchase price ($300 to $400) |
$500 |
$100 to $200 |
No. You do not have to pay the amounts listed above IF you negotiate better terms. For example, you can tell the dealer if he wants your business, he will agree to:
That way, you will have more time to get the car inspected by a trusted, independent mechanic. Also, if you bought it on a weekend, you can either keep it or return it the following weekend. If dealer refuses to meet your terms, you can take your business elsewhere.
If you obtain the return option, you can get a refund even if the car has a “defect or mechanical problem that manifests or becomes evident after delivery that was not caused by the buyer.” (Quote is from the statute, AB 68.)
Example: You buy a used car on Saturday and get the return option. You drive the car normally and don’t abuse it. On Sunday, the engine throws a rod. The car is undriveable. You have it towed back to the dealership. The car had a pre-existing defect that became obvious when the engine threw a rod. The dealer must give you a full refund, with no deduction for the damage caused by the latent problem.
Be sure to take good care of the car. Protect it from theft or vandalism. Don’t speed, go off-roading, or abuse it. If you misuse the car or cause damage, the dealer is allowed to charge you for the damage. You can also lose the right to bring the car back for a full refund.
If the dealer refuses to give you a refund, or tries to charge you for problems you did not cause, consult a qualified auto fraud attorney. To find an attorney who specializes in auto fraud cases, visit the National Association of Consumer Advocates, at http://www.naca.net.
Also contact Consumers for Auto Reliability and Safety (CARS) via e-mail at stopscam@earthlink.net. Your input is important for making the law stronger for consumers.
At least 250 miles. Some dealers offer more miles. You can negotiate with the dealership over the distance you are allowed to drive and still use the return option. Before you leave the dealership, be sure to read your return option agreement carefully to find out exactly how far you are allowed to drive before you return the car.
Yes. This is one of the best parts of the new law. You can bring the car back for a refund for ANY reason. This is true, even if you bought it “AS IS.” Also, you do not have to explain to the dealership why you don’t want it anymore.
If you get the return option, and reject the deal, the dealer must give you back the car you traded in or left as a downpayment.
If you got the return option for free, and the dealer fails to give you back your trade-in, he must pay you either of these prices:
If you paid extra for the return option, and the dealer fails to give you back your trade-in, he must pay you either of these prices:
BUYER BEWARE: The dealer has until the day AFTER the day when you reject your new purchase to give you back your trade-in vehicle. This is a huge weakness in the new law. Plan ahead and have a way to get home from the dealership—just in case the dealer refuses to give you back your trade-in until the next day. Arrange for a friend or relative to follow you in another car, take a taxi, or know how to get home on public transportation.
Take good care of the car and don’t speed or abuse it.
Take photographs of the inside and outside of the car before you drive it off the dealer’s lot. When you return the car, the dealer is allowed to charge you for damage you caused to the vehicle. The photos will help protect you against false claims.
Drive the vehicle fewer than 250 miles. Exception: if the dealer agrees in writing you can drive it more miles.
Return the vehicle within two days. Exception: if the dealer agrees in writing you can have more time.
Make sure the vehicle is in the same condition it was when you bought it. Exceptions: reasonable wear and tear. Damage due to defects or problems you didn’t cause.
Make copies of the contract and all other purchase documents. Keep copies for your records in a safe place. Deliver the originals of all purchase documents to the dealer.
Return the vehicle and the original paperwork in person before the date and time noted on your contract.
Sign all documents necessary to complete the return.
“Loan packing” is a very common, highly sophisticated scam that has become a major source of profits for many unscrupulous auto dealers. Loan packing involves deceiving you about the amount you are being charged for add-on items. If you resist buying them, the dealership employee may pressure you. They may tell you that you must buy them to get a lower interest rate or to get financing from a bank. That is false.
High-profit items that are added on. Usually, you don’t ask for these items. Instead, the finance manager tries to talk you into getting them. They include theft etching, paint sealant, rust proofing, GAP insurance, extended service contracts, and special sound systems. Sometimes, dealers group items together and give them a fancy name. Beware of the so-called “luxury package.” Bottom line—you are paying way too much for items that have little value, but make a huge profit for the dealer. A better buy—added safety features like stability control, which are proven to actually save lives.
“Loan packing” can cost you hundreds or thousands of dollars in hidden extra charges. Dealership employees are trained to tell you that the items are free, or would add only a tiny amount to your monthly payment. But in reality the cost is far higher. For example, an AutoNation dealership in Southern California cheated thousands of car buyers through a loan-packing scheme. The dealership was caught and prosecuted, and paid $2.5 million in fines and compensation to over 1,000 victims. One car buyer was tricked into paying about $6,000 for “theft etching” that cost the dealer less than $40.
Refuse to buy items commonly packed into loans, such as “GAP” insurance, extended service contracts, credit life insurance, “theft etch” (etching the Vehicle Identification Number or VIN onto the windows), clear coating, fabric protection, rustproofing, or other add-ons. Be sure to read the contract carefully before you sign, and if the dealer has added unwanted items, leave without signing anything. If the dealer tries to pressure you into buying them, that’s a sure sign they are trying to make a killing at your expense. Some dealers try to pressure buyers into agreeing to add-ons by claiming you cannot get a loan unless you buy those extras. That is false.
Dealers and manufacturers call some used cars “certified” so they can charge more for them. Basically, you are paying the dealership a lot extra instead of paying about $100 to have your own trusted mechanic and body shop do an inspection for you.
BUYER BEWARE: The Car Buyers Bill of Rights may NOT protect you from serious problems with a “certified” car. Many “certified” cars have been in wrecks, floods, or other catastrophes. The warranty on a “certified” car may be void due to prior damage. A damaged “certified” car may not provide the same level of protection if you are in crash.
Probably not. It’s a better use of your money to pay $100 for a thorough inspection by a trusted body shop and mechanic instead of paying a lot more for a warranty. Why? Because if there was hidden damage due to a crash, fire, or flood, the manufacturer will not honor the warranty. The same goes for extended service contracts. Too often, consumers pay extra for a warranty, and get burned because the warranty is void due to undisclosed prior damage.
This score is a financial “report card” based on the way you handle your loans and credit. A good credit score usually means you can get the lowest interest rates. Scoring methods differ, so you may get slightly different scores from dealers who use different companies to get your score.
Fair Isaac is one of the largest credit scoring companies. According to leading credit expert Evan Hendricks, author of the book Credit Scores and Credit Reports, Fair Isaac divides the scoring range into 5 risk categories:
780 to 850—low risk
740 to 780—medium-low risk
690 to 740—medium risk
620 to 690—medium high risk
620 and below—high risk or “sub-prime”
Most auto lenders pay dealers a hidden fee to charge you a higher interest rate than you deserve based on your credit history. This extra interest is called a “markup,” extra profit that is split between the dealer and the lender.
The new law limits the “markup” amount dealers can get. Dealers may not receive more than 2.5% from lenders for arranging financing if your car loan is up to 60 months long, or 2% if it is longer.
To get the best rate on a car loan, check with banks, credit unions, or online lenders before you shop for a car. Find out what is the best rate you can get for your loan. Taking an hour or two to shop around can save you thousands of dollars.
Dealers advertise $0% financing,” but often charge consumers a higher rate. This is like “bait and switch” financing. Usually, you can get a better rate yourself than from the dealer.
A lower interest rate can save you $2,000--$10,000 or more in finance charges over the life of the loan.
BUYER BEWARE: Don’t become a victim of “yo-yo” financing. What’s yo-yo financing? A very common scam. You think you have a deal. You drive the car home and show it to your friends. Then you get a phone call from the dealer. He tells you there was a problem and you have to bring the car back. He reels you back in. Then he tries to re-do the deal, to his advantage. He may seek a larger down payment and/or a higher interest rate. He may even threaten to report the car stolen if you refuse to agree to the new terms. The law is clear: you do NOT have to accept a worse deal.
Even consumer reporters who are experts at avoiding scams have fallen prey to yo-yo financing. If a dealer tries to pull this ploy, call a qualified auto fraud attorney for assistance to make sure your credit isn’t damaged in the process. For information about how to locate an experienced, pro-consumer attorney, check out www.naca.net.
Insist on having your own trusted mechanic check out the car before you
agree to anything. To find a qualified independent, trusted technician,
check out Car Talk’s MechanX Files, at:
http://www.cartalk.com/content/mechx/index-noncar.html
If you live in the Bay Area, you also have access to Bay Area Consumers’ Checkbook
which rates services including auto repair facilities. Call your local
bookstore for a copy of Consumers Checkbook magazine. Make sure you get the
edition that rates auto repair shops in your area. Or check out Checkbook
online at:
https://www.checkbook.org/subscribe/dbsubscribe.cfm.cfm?area=b
It’s also a good idea to check a repair shop’s credentials and
records at the California Bureau of Automotive Repair, at:
http://www.smogcheck.ca.gov/stdPage.asp?Body=/Consumer/verify_a_license.htm&TextOnly=False
To find out more about your rights, contact an attorney who specializes in representing consumers. Some attorneys are willing to talk with potential clients for free. The National Association of Consumer Advocates (www.naca.net) lists attorneys who specialize in auto-related cases on behalf of consumers. Many consumer protection laws provide for attorneys fees, in addition to refunds, making it affordable to get justice.
The new law is a watered-down version of the Car Buyers Bill of Rights initiative written by Consumers for Auto Reliability and Safety (CARS) in 2003. The idea was to address many of the worst scams that plague California car buyers, and allow Californians to vote for the new law as a ballot initiative. Polling showed it was immensely popular.
But-- lawmakers in Sacramento did their own polling, realized how popular it was, and decided to introduce legislation. At the author’s request, CARS agreed to abandon the initiative and sponsor the legislation. But auto dealers disliked that bill (AB 1839, Montañez), and at their behest, Governor Schwarzenegger vetoed it.
In 2005, labor unions adopted a similar initiative and gathered signatures for it. Then it became a bargaining chip in negotiations among labor unions, Governor Schwarzenegger, and auto dealers over the hotly contested Special Election. At the last minute, lawmakers reached a compromise with auto dealers, and the unions agreed not to submit the signatures. CARS did not sponsor that bill (AB 68, Montañez), but worked to make it as strong as possible for consumers.
The new law was so watered down, auto dealers supported it more enthusiastically than consumer groups. When the Governor signed the bill, auto dealers and the author were at the ceremony, but consumer groups were conspicuously absent.
No. The Car Buyers Bill of Rights is seriously flawed. It’s also unprecedented and a huge experiment. While it’s a step forward in some ways, consumer groups caution other states to allow California to gain some experience and work out the inevitable kinks before they try to imitate the law.
The new law, AB 68 (Montañez), is posted at:
http://info.sen.ca.gov/pub/bill/asm/ab_0051-0100/ab_68_bill_20050726_chaptered.html