Effective July 1, 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.
Existing 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 solicitation contracts (door-to-door sales), home mortgages,
health studio and dance studio contracts, but not automobiles. The new Car Buyer's Bill of Rights does
not change existing law in that regard.
The new law gives the consumer the option
to buy the 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 for
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 worse than they were led to believe, such as the Consumers Legal Remedies Act, and the Automobile Sales and Finance Act,
In any event, the new law applies only to conditional
sales contracts, which are contracts which require future payments (not cash sales, or not contracts where the consumer comes
to the dealership with their own financing pre-arranged), 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 leases with large residual payments).
The new law also requires sales contracts for sales that are financed by or through the dealer to include the amount charged
for an often useless service contract, a worthless theft deterrent device, any debt cancellation agreement like GAP, the amount
charged for a worthless surface protection product, and the amount charged for the 2-day option, within the listing of "itemization
of the amount financed." This was a nice addition to the existing detail required by the Automobile Sales and Finance
Act. Even better, 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 60-month finance contracts and 2% for contracts longer than 60 months.
new law expands 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. This means the Dealer must give you, prior to sale, a
completed inspection report indicating all the components inspected.
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, was repurchased under
warranty law, the title is branded with "Lemon Law Buyback," "Salvage," or similar, 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 the vehicle "AS-IS."
new law prohibits a dealer from adding charges to a sale or lease contract without the buyer's consent or inflating a
payment or extending the maturity of a contract for the purpose of disguising the actual charges for goods or services.
new 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 prior to the sale or lease of that vehicle.