Overview of Selected Consumer Laws | California Car Buyer's Bill of Rights

 

          Since 2006, California law requires dealers to offer a 2-day contract cancellation option on used vehicles with a purchase price of less than $40,000.00.

​

          Prior law did not, contrary to popular belief, provide automobile buyers with an automatic 3-day right to rescind.  That automatic 3-day right applies to some contracts, like home mortgages, home solicitation contracts (door-to-door sales), health studio and dance studio contracts, but not automobiles.  The Car Buyer's Bill of Rights did not change existing law in that regard.

 

          Instead, the law gives the consumer the option to buy a 2-day right to cancel.  The price varies depending on the price of the car, from $75.00 to $399.99.  Plus, if you exercise your right to cancel and return the car, the dealer can, and of course will, charge you a restocking fee, of $175.00, $350.00, or $500.00, depending on the price of the car, but you do get a credit for the amount you paid to buy the option.

 

          In practice, virtually all car buyers who buy used cars initial the box in a special form declining to purchase the option, many unknowingly, and the vast majority of the rest because the finance manager says "You don't want to pay an extra $500.00 to buy a 2-day cancellation option, do you?

 

          The good news is that car buyers who want to cancel their car contracts still have the other consumer statutes that have always been on the books, since at least the 1960's, to help them get their money back when the deal turns out to be much worse than they were led to believe, such as the Consumers Legal Remedies Act, and the Automobile Sales and Finance Act, among others.  

 

          In any event, the law applies only to conditional sales contracts, which are financed contracts which require monthly payments (not cash sales, or not contracts where the consumer comes to the dealership with their own pre-arranged financing), and some leases, but only if the lease provides for payments by which the lessee agrees to pay a sum substantially equivalent to or in excess of the aggregate value of the vehicle and the lessee will become, or for no other or for a nominal consideration has the option of becoming, the owner of the vehicle upon full compliance with the terms of the lease agreement. (This would rule out most leases, which normally have large residual payments).

 

          The law prohibits a dealer from adding charges to a sale or lease contract without the buyer's consent, or from inflating a payment or extending the maturity of a contract for the purpose of disguising the actual charges for goods or services.  To this end, the law requires that prior to signing a conditional sales contract, the Dealer must provide a buyer with a written disclosure (a Pre-Contract Disclosure) form, that list the amounts charged for all "add-ons," including any service contract, any insurance product, any debt cancellation agreement or guaranteed asset protection waiver agreement (GAP), any theft deterrent device, any surface protection product, and any vehicle contract cancellation option agreement.  Still further, the Dealer is required to list all these "add-ons" on a separate sheet of paper for the buyer to sign, listing the price for each "add-on," and indicating what the monthly car payment would be with, and without, the "add-ons."

 

          The new law prohibits a seller, in consideration of an assignment of a conditional sale contract, from receiving or accepting from the assignee (the financial institution) any payment or credit based upon any amount collected or received under the contract, or to be collected or received, in excess of specified amounts. This limits the undisclosed kickback to the dealer ("mark-up") to 2 1⁄2% for contracts for 60-months or less, and 2% for contracts longer than 60 months.

 

          The law expanded existing provisions regarding advertising to prohibit a dealer from advertising or selling a vehicle as "certified," or using similar descriptive terms to imply that the vehicle meets the terms of a used vehicle certification program, unless that vehicle meets specified criteria, and makes violations of this provision actionable under the Consumers Legal Remedies Act and the Unfair Competition Law, and as false advertising.  Any Dealer selling you a vehicle sold as a Certified Pre-owned (CPO) vehicle must give you, prior to the sale, a completed inspection report indicating all the components inspected.

 

          Regarding a Certified Pre-owned ("CPO") used car, the law makes it illegal for a car dealer to advertise for sale, or sell a used vehicle as "certified" (or similar term), if the vehicle has odometer discrepancies, if it was repurchased under a warranty law by the manufacturer because it was defective, if the title is branded with "Lemon Law Buyback," "Salvage," or similar branding, the vehicle was involved in a prior accident, fire, or flood that after repair substantially impairs the vehicle's use or safety, or had prior frame damage.  It is also illegal to sell a "Certified" vehicle "AS-IS."  

 

          The law requires a dealer that obtains a consumer credit score from a consumer credit reporting agency, for use in connection with an application for credit for the purchase or lease of a motor vehicle for non-commercial use, to provide the credit score to the consumer in writing prior to the sale or lease of that vehicle.