As I write this, the ink from Gov. Gavin Newsom’s pen is still wet from signing Senate Bill 766, the California CARS Act. While the effective date of this new law is not until Oct. 1, 2026, that will be here before we know it. Much needs to be done to prepare.
The CARS Act will change the way dealers advertise, present and contract voluntary protection products, what California calls “add-ons.” Here are seven things dealers and, by extension, agents, need to know and do:
1. ‘Total Price” and Written Disclosures
Any written negotiation that references a monthly payment must also disclose, clearly and conspicuously and in writing, the total amount the consumer will pay over the term at that payment, and if it assumes cash or trade equity, the assumed amount.
The deal worksheet and menu require space for the total of payments at quoted monthly amount, and the assumed consideration that goes into the calculation of amount financed. If a longer term lowers the total paid for financing, this must be disclosed, as well. Think Truth in Lending Act box(es), only earlier in the process.
And if the negotiation is primarily in a language covered by Civil Code §1632, this disclosure must also be provided in that language.
2. ‘Add-Ons Are Optional’ Notice
Whenever a dealership employee makes a written representation about an “add-on,” the document must say at least once — clearly and conspicuously, of course — that the add-on is not required and the buyer can purchase or lease the vehicle without it.
Put this statement on your F&I menu and any product one-pagers. Provide it in the language used in the negotiation when §1632 applies.
3. Ban on Add-Ons That Don’t Benefit the Buyer
Dealers may not charge for an add-on if the consumer would not benefit from it. The statute gives concrete examples, including:
Oil-change plans on EVs
Nitrogen tire products below 95% purity
Service contracts void due to pre-existing conditions
Catalytic converter marking for vehicles without one
Surface protection that voids the paint warranty
Dealers must align their product eligibility rules and underwriting questions with this standard.
4. GAP and Lease Notices; Document the Math
Contracts must reflect that any GAP agreement complies with referenced civil code sections, so dealers need to retain loan-to-value calculations in deals that include GAP.
If a lease makes the customer liable for a “gap” on total loss, the contract must include a bold “GAP LIABILITY NOTICE” on page one. Lease forms and e-contract templates should be updated accordingly.
5. Record Retention — Two Years, and It’s Specific
Dealers must keep for two years:
Communications/ads showing the total price
Purchase orders, retail and lease docs, and all written communications with any buyer who signed a purchase order or finance/lease contract
Add-on records, e.g., service contracts, GAP, proof of timely payment to providers, and loan-to-value calculations for GAP
Cancellation requests and proof of refunds/returns.
Written complaints/inquiries related to add-ons or vehicles.
Ensure your dealers’ dealer management/customer relationship management systems can tag and retain the first written communication that references a specific vehicle or payment. This also suggests dealership employees must not use their personal cellphones or other devices to communicate with customers. Use monitored, dealership-controlled communication tools only!
6. Mandatory Used-Car Cooling-Off Right
For used vehicles priced at $50,000 or less, California buyers get a three-day right to cancel, with a 400-mile cap and permitted restocking fee. Forms must explain how to exercise the right, and dealership workflow must handle trade-ins/refunds correctly when the right is exercised. The old optional two-day cancellation program is superseded.
7. Showroom Signage
Beginning Oct. 1, 2026, dealers must display new, large-type signage clarifying no cooling-off for new vehicles and the three-day right for qualifying used vehicles, with required language.
All of that’s a lot to know, and agents can expect to be looked upon as resources for compliance. Fear not — tools to equip agents are being prepared. Automotive Compliance Education (ACE), for example, is creating a new California Car Law certification program that will be available by NADA Show 2026. Agents who are certified ACE trainers can also deliver this training.
Whatever approach you take as an agent, get ready — Oct. 1, 2026, will be here before you know it.
James S. Ganther, Esq., is CEO of Mosaic Compliance Services.
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