New laws will change car buying in California

California lawmakers made major changes to the state’s car-buying rules this year, including a controversial rewrite of state law that allows buyers to get their money back if they’re sold a defective vehicle and the right to return a used vehicle within three days.

After an intense lobbying push this year from auto companies, dealers and consumer groups, more legislative battles over car purchases in California could follow in 2026. Sky high car prices show no signs of falling and led by Republicans Congress and on the Trump administration have tried to thwart Newsom’s goal 100% of new cars sold in California to be zero-emission by 2035.

Sen. Ben AllenA Democrat representing the El Segundo district said he expects the Democratic-controlled California Legislature is likely to fend off a national Republican attack on California’s vehicle policies next year, though he said it’s not yet clear how.

“We’re very committed to this path, so stay tuned, but clean air is a priority for our state,” said Allen, who chairs the Senate’s special committee on transitioning to a zero-emissions energy future.

Meanwhile, Gov. Gavin Newsom signed Allen’s Senate Bill 766creating a first-in-the-nation policy that allows a buyer to return a used vehicle for a full refund within three days if the purchase price was under $50,000. Dealers may charge a restocking fee.

The law, which takes effect in October, also contains other protections for buyers designed to prevent them from being scammed.

Car dealers will be required to tell the potential buyer — including in advertisements and initial written communications — the actual price of the vehicle instead of an unrealistic advertised price. Potential buyers will also need to be informed of the full financing costs and lease terms.

The law also prohibits dealers from charging for add-ons that have no benefit to the buyer, such as free oil changes for electric vehicles — which don’t need an oil change.

“This is a huge deal,” said Rosemary Shahan of the Car reliability and safety userswho defended the bill. “It’s historic. It’s going to make cars more affordable.”

Allen said he came up with the idea for the bill after shopping for a used car in 2024. He said he wanted to see what it was like to try to buy a used car in California and didn’t tell the various dealerships he visited that he was a state senator.

“I was kind of shocked by the commotion and the extent to which prices were quoted online and it ended up not being true,” he said.

He ended up buying a 2021 Ford Mustang Mach-E, an electric vehicle.

Newsom blocks document fee hike

Most bills go into effect as soon as a year after they are signed, but lawmakers delayed implementation of Allen’s bill until October to give dealers time to change their paperwork, change their contracts and change their signs to comply with the new law.

Brian Maas, president of the California New Car Dealers Association, said the law should make buying a used car more transparent and easier for consumers.

“The bill is certainly a net positive in terms of more transparency around the overall price and advertising,” he said.

But he said the new law “clearly puts more responsibility on dealers,” which is why Maas said his group was extremely disappointed that Newsom vetoed the bill, which would have allowed dealers to raise document processing fees by $175.

Senate Bill 791 would have raised the fees dealers can charge for Department of Motor Vehicles processing and other paperwork from the current cap of $85 to up to 1 percent of the purchase price, capped at $260.

Maas said dealers are frustrated by Newsom’s veto message who said the fee increase was unnecessary because the state had imposed “no new state requirements” on auto dealers.

Maas said it was “particularly disappointing that the veto announcement somewhat casually said there were no new state requirements when the governor signed exactly such requirements a week earlier.”

Before the veto, SB 791 passed the Legislature overwhelmingly and with bipartisan support. The California New Car Dealers Association has donated at least $3 million to lawmakers since 2015, according to the digital democracy database.

Maas said there are so many forms car buyers have to fill out, almost all of them stemming from a law passed by the Legislature, they’re starting to look like click-through agreements on websites that everyone just agrees to without actually reading.

“You’re pushing form after form in front of users,” he said. “Users just set it up, turn it off, and say, ‘You know what? I just want to know what my monthly payment is, what’s the interest rate, what’s the total cost of the car. And then there we go. Why do I have to sit here for half an hour or an hour and fill out all these forms?’ “

Consumers face the watered down lemon law

Newsom also signed Senate Bill 26a bill that allows automakers to opt out of changes to the state’s lemon law that gives users have the right to get their money back if they buy a defective vehicle – sometimes called a “lemon”.

The result is that California car buyers have different legal protections under the state’s lemon law depending on which brand they buy.

The bill Newsom signed was in response to a law legislators in a hurry passed at the end of the 2024 legislative session, watering down the state’s landmark 55-year-old Lemon Law. some

car companies, namely GM and Ford, were sued so often for allegedly selling so many lemons that state courts were jammed with cases.

The companies and some advocacy groups convinced lawmakers and Newsom to pass legislation in 2024 that would shrink the time a car buyer can sue under the lemon law to just six years instead of the entire car warranty period

Last year’s legislation also put more of a burden on car owners to file claims, rather than on car companies.

But other companies that are not sued as often for selling defective vehicles, such as Toyota and Honda, have opposed the rule change. Those companies said the new law didn’t give them time to prepare their best defense

Newsom finished reluctantly signing the 2024 bill, but he insisted the Legislature to come back with a new bill in 2025 that would allow companies to opt out of the changes. SB 26 passed overwhelmingly and Newsom signed it.

Meanwhile, several car companiesincluding Ford and GM and dozens of caravan and motorcycle manufacturers have signed on to the 2024 law this year.

Toyota and Honda, as expected, did not.