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. In practice, this new
law is proving rather useless, at least to consumers.
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 mortgages and dance studio contracts, but not automobiles. The new
Car Buyer's Bill of Rights does not change existing law in that regard.
undoubtedly started as a noble attempt to create a new Bill of Rights for car buyers was indeed a noble gesture. Unfortunately,
like any other modern attempt to create a new law to benefit consumers, by the time our legislators caved in to changes insisted
on by the big money lobbyist, the law ended up doing little, if anything, for consumers.
First of all, the right is not automatic, as it should be and was originally intended. Rather, the consumer has to buy
the right (the law does not require the dealer to charge for it, but allows the dealer to charge for it
- same difference). The price varies depending on the price of the car, from $75.00 to $399.99. Plus, if you exercise
your right to 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 paid for the option).
In practice, virtually all car buyers who have financed (does not apply to cash sales, or sales where buyer
arranged her/his own financing in advance) the purchase of a used car under $40,000.00 since the law was enacted, 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, as indicated above, 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), or a lease, but only if the lease provides for
payments by which the bailee or lessee agrees to pay as compensation for use a sum substantially equivalent to or in excess
of the aggregate value of the vehicle and 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, a usually unnecessary insurance product like GAP, the amount charged for a worthless
surface protection product, any debt cancellation agreement, and the amount charged for the used vehicle contract cancellation
option agreement, 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, listing the price for each, and indicating what the monthly car payment would be with, and without,
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.
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. There is, unfortunately, no penalty for a violation of this