Car Dealer Fraud in California: The New CARS Act and Your Demand Letter

What counts as car dealer fraud in California?

Under the CARS Act, a dealer violates the law by misrepresenting material information about the deal (Civil Code section 1784.40). Material means likely to affect your choice. The Act lists the topics where a misstatement counts, including:

• The costs or terms of buying, financing or leasing the vehicle.
• The cost, limits or benefits of any add-on product or service.
• Whether the final contract is a lease or a sale.
• Whether a vehicle is really available at the total price the dealer advertised or quoted.
• Whether you have been preapproved or are assured any product, service or term.
• What your credit application says.
• Whether the dealer will keep your cash down payment or trade-in, charge fees or start legal action if the deal is not finalized.
• Whether and when the dealer will pay off the loan or lease on your trade-in.

Older laws still apply alongside the new one. The Consumers Legal Remedies Act (CLRA) prohibits a list of deceptive practices in consumer sales, and the CARS Act says its remedies are in addition to remedies under other law (section 1784.22). A dealer also cannot get you to sign away CARS Act protections: any waiver is void (section 1784.21).

What changed for California car buyers on October 1, 2026?

Senate Bill 766 (Chapter 354, Statutes of 2025) created the CARS Act and replaced the old used car contract cancellation option in Vehicle Code section 11713.21, which was repealed as of October 1, 2026. Which rule applies depends on your purchase date.

Dealers must also keep records showing compliance for two years, including written complaints from buyers (section 1784.44). A complaint you put in writing becomes part of the file the dealer is required to keep.

Can you return a used car in California within 3 days?

Yes, for most used vehicles bought or leased from a dealer on or after October 1, 2026 at a price of $50,000 or less. Motorcycles are excluded, and the right ends if the car has been driven more than 400 miles since signing (section 1784.43). There is no cooling-off period for new vehicles, and the contract's first page must say so.

1. Count the days. The period is three calendar days starting the day after you sign. If day three falls on a day the dealership is closed, it runs to the next day it is open.
2. Check the odometer against the mileage on your contract.
3. Find the separate disclosure titled 3-Day Right to Cancel Used Car Purchase or Lease, which explains the restocking fee.
4. Return in person during business hours with the vehicle and any other cash or items you received in the deal.
5. Expect a restocking fee: 1.5% of the sale price, with a $200 floor and a $600 ceiling. If the car has gone more than 250 miles, the dealer may add $1 for each extra mile, up to $150. The fee is taken out of any refund.
6. Ask for the cancellation receipt, which must itemize every deduction and show the date and time you cancelled.

The dealer must cancel the contract and refund you within 48 hours, minus allowed deductions, although payments by check can wait until two business days after the funds are verified. Your trade-in must be returned. If it has already been sold or the title transfer started, you are owed the greatest of the agreed trade-in value, the price the dealer got, or fair market value.

Which dealer add-ons can you challenge?

A dealer may not charge for an add-on that gives you no benefit (section 1784.42). The statute names examples:

• Nitrogen tire fills with less than 95% nitrogen purity.
• Products that do not cover the vehicle, you or the transaction.
• GAP agreements that do not comply with the Automobile Sales Finance Act.
• A service contract that is void because of prior crash or flood damage or existing mechanical problems.
• Oil changes sold with an electric vehicle.
• Catalytic converter markings on a car that has no catalytic converter.
• A surface protection product that voids the paint warranty.

When a dealer describes an add-on in writing during negotiation, it must also state at least once, in writing, that the add-on is not required and that you can buy or lease the car without it (section 1784.41(b)). If you never received that disclosure, say so in your letter.

What if the dealer says your financing fell through?

Say the dealer calls a few days after you drive home: the loan was not approved, and you need to sign a new contract at a higher rate. The CARS Act makes it a violation to misrepresent whether the dealer will keep your down payment or trade-in, charge fees, or take legal action if the deal is not finalized (section 1784.40(g)).

A separate older rule covers buyers who arranged their own loan. If the dealer knew you planned to get financing from a third party without the dealer's help and you could not get it, the contract is treated as rescinded and each side returns what it received (Civil Code section 2982.9).

How to write a demand letter to a car dealer

If you plan to seek damages under the CLRA, the law requires written notice at least 30 days before suing. The notice must name the specific violations, demand that the dealer correct them, and go by certified or registered mail, return receipt requested, addressed to the place of the sale or the dealer's principal place of business in California (Civil Code section 1782). A demand letter can serve as that notice.

• Identify the vehicle by year, make, model and VIN, and give the contract date.
• Quote or attach the advertisement, text or worksheet showing the price or payment you were promised.
• List each charge you dispute, with its line number and amount.
• Name the rules involved: the CARS Act sections and Civil Code section 1770.
• State the fix you want: a refund of a specific add-on, a corrected contract, or cancellation and return of your trade-in.
• Give a response date at least 30 days out if the letter doubles as CLRA notice.

Where else can you report a California car dealer?

The DMV Investigations Division enforces the laws, rules and regulations that apply to new and used vehicle dealers. If you believe a dealer broke those laws, you can file a complaint with the division, which has offices around the state.

Individuals can sue for up to $12,500 in small claims under section 116.221 of the Code of Civil Procedure, and sending a demand letter before small claims in California walks through filing. If the problem is a defect the dealer cannot fix rather than a sales practice, the California lemon law guide may fit better, and repair-shop billing fights are covered in car repair disputes.

When to have an attorney write to the dealer

A dealer dispute lives in the paperwork: the buyer's order, the finance contract, the add-on forms and the texts with a salesperson. Having an attorney write the letter can help when the amount is large, when your trade-in has already been sold, when you want the letter to serve as CLRA notice, or when the dealer has stopped answering.

Through Talk to My Lawyer, a licensed California attorney writes your letter from your facts and documents (the contract, the quotes, the messages) and sends it on your behalf, citing the CARS Act or the older rules depending on when you bought the car. If you are weighing a lawsuit, get advice from a lawyer on your own facts.