California's CARS Act and Your Car Lease

What the law is and when it starts

Senate Bill 766 (Chapter 354, Statutes of 2025) added the California Combating Auto Retail Scams (CARS) Act to the Civil Code as sections 1784.20 through 1784.44 (§ 1784.20). It became operative on October 1, 2026 (§ 1784.28). Section numbers below are Civil Code sections unless marked otherwise.

The law’s stated purpose is to protect “purchasers and lessees of new or used motor vehicles” against unfair and deceptive practices (§ 1784.30). It applies to licensed California motor vehicle dealers and to anyone else who meets the Vehicle Code § 285 definition of a dealer (§ 1784.31(c)). Excluded transactions include wholesale sales, fleet sales, and vehicles with a gross vehicle weight rating of 10,000 pounds or more (§ 1784.31(f)(2)). A consumer cannot waive its protections (§ 1784.21), and its remedies add to those available under other law (§ 1784.22).

Lease or purchase: which rules reach you

Most of the CARS Act is written for purchasers and lessees alike. The big exception is the three-day right to cancel, which covers used vehicles only.

The three-day right to cancel covers used vehicles only

Section 1784.43(a)(1)(A) says a dealer “shall not sell or lease a used vehicle at retail” at a price of $50,000 or less without giving “the buyer or lessee” a three-day right to cancel. A used-vehicle lease is covered on the same terms as a purchase. Motorcycles are excluded (§ 1784.31(k)).

A new-vehicle lease is not covered. Every California lease contract must now contain the notice from § 1784.43(e), which begins “CALIFORNIA DOES NOT HAVE A COOLING-OFF PERIOD FOR NEW VEHICLES” (§ 2985.8(e)). It replaces the lease contract’s old “THERE IS NO COOLING OFF PERIOD” notice. That is the only substantive change SB 766 made to the lease-contract statute. The rest of that statute carries forward, including the federal Regulation M disclosures (§ 2985.8(c)(1)) and the itemization of gross capitalized cost (§ 2985.8(c)(2)). If you lease a new car, the CARS Act gives you no right to change your mind after signing.

Counting the days. The period is three calendar days, starting the calendar day after the lease is executed. If the third day falls on a day the dealership is closed to the public, the period extends to the next day it is open. The right ends at the close of business on the last day (§ 1784.31(i)). Sign on a Friday, and the days are Saturday, Sunday, and Monday. A Sunday closure does not change that, because only the third day extends; if the dealership is closed that Monday, the right runs through the close of business Tuesday.

When it does not apply. The right is lost once the vehicle has been driven more than 400 miles since signing (§ 1784.43(a)(1)(B)). It does not apply above $50,000 (§ 1784.43(g)). It also does not apply when you buy the car you already lease and have in your possession, as in a lease buyout (§ 1784.43(h)).

One point the text does not settle. The ceiling is stated as “a price” in § 1784.43(a)(1)(A) and as “purchase price” in § 1784.43(g). The statute does not say which lease figure is measured against $50,000, such as the agreed-upon value or the capitalized cost, or whether taxes and fees count. If a used-vehicle lease is near that line, ask the dealer to state in writing whether the right applies. For a covered vehicle, the dealer must hand you a separate document titled “3-Day Right to Cancel Used Car Purchase or Lease” (§ 1784.43(b)).

The restocking fee, with the statute’s math

The dealer cannot charge for the right itself but may charge a restocking fee. The required disclosure must explain how it is calculated (§ 1784.43(b)(4)). The limits are in § 1784.31(g):

The base fee hits its $600 ceiling at a $40,000 sale price (40,000 × 0.015 = 600). Below about $13,333, the $200 minimum applies (200 ÷ 0.015 ≈ 13,333). The mileage charge reaches $150 at 400 miles (250 + 150). The largest total the statute allows is $600 + $150 = $750. If the dealer charged you a shipping fee, it may keep its actual shipping cost in place of the base fee, up to the same limit, and refund the rest (§ 1784.31(g)(1)(B)).

The base fee is a percentage of the vehicle’s “sale price,” and the statute does not say what figure stands in for that on a lease. Ask for the dealer’s calculation in writing.

Returning the vehicle

The required disclosure must tell you that the right applies only if you personally deliver the vehicle to the dealer during business hours. The vehicle must be free of liens other than those created by the transaction, and in the condition it was delivered, apart from reasonable wear and tear and defects you did not cause. You also return anything else you received in the deal, and pay any restocking fee not taken from your refund (§ 1784.43(b)(6), (a)(2)).

The dealer must cancel the contract and refund you within 48 hours, less allowed deductions. Delays outside its control, such as bank processing, are excepted, and a check or other unverified payment may be refunded two business days after it is verified (§ 1784.43(d)). A trade-in must be returned. If it has already been sold, or its title transfer started, you are owed the greatest of the agreed value, the sale price, or fair market value, minus any debt secured by it (§ 1784.43(a)(3)). Impeding a cancellation, overcharging the fee, or withholding your down payment or trade-in is a violation (§ 1784.43(c)).

These duties are written for the dealer. Many leases are assigned to a bank or captive finance company, and the section does not describe a separate step for that company. Keep the dealer’s cancellation paperwork, and confirm with the leasing company that the account is closed.

Rules that apply to every lease, new or used

No misrepresenting lease costs or terms

Section 1784.40 bars a dealer from misrepresenting “material” information, meaning information likely to affect your choice or conduct (§ 1784.31(e)). The covered subjects include the costs or terms of leasing, any aspect of an add-on, and whether the final contract is a lease or a sale. They also include whether and when the dealer will pay off the loan or lease on your trade-in.

A written monthly payment comes with a written total

Suppose a dealer puts a monthly payment in writing while you negotiate a specific vehicle. It must then disclose at least once, clearly and conspicuously in writing, the total you will pay to purchase or lease the vehicle at that payment after making all scheduled payments. If the total assumes a cash down payment or trade-in value, the dealer must state that amount too (§ 1784.41(c)). A written comparison that discusses lower monthly payments must say they often increase the total you pay (§ 1784.41(d)).

The statute does not list which lease charges belong in that total. For example, it does not say whether drive-off amounts beyond a stated down payment count, or charges due only at lease end. Treat the figure as a starting point and rebuild the complete cost yourself.

Add-ons must be optional and must be able to benefit you

An “add-on” is a product or service the manufacturer did not provide or install, which the dealer charges for in a sale, lease, or financing transaction (§ 1784.31(a)). When a dealer describes an add-on in writing during negotiation, it must state at least once, in writing, that the add-on is not required and that you can purchase or lease without it (§ 1784.41(b)).

Section 1784.42(a) bars charging for an add-on the “purchaser or lessee would not benefit from.” Its examples include oil changes for an electric vehicle and a service contract voided by preexisting conditions. A product you choose and would benefit from may still be charged for, even if you never use it (§ 1784.42(c)).

That section opens by referring to “the sale or financing of vehicles,” while its subdivisions name the “purchaser or lessee.” The text does not explain the difference, and this guide does not try to resolve it. Either way, any add-on financed into a California lease must appear in the contract’s “Itemization of Gross Capitalized Cost” (§ 2985.8(c)(2)).

Total price in ads and the first written reply

Section 1784.41(a) requires the vehicle’s total price in advertisements for a specific vehicle, and at least once in the dealer’s first written reply about it. You can ask in writing for a copy of that reply, which the dealer must keep for two years (§ 1784.41(a)(3)(B)). “Total price” includes dealer price adjustments and installed items, subtracts no rebates, and excludes the taxes and fees listed in Vehicle Code § 11713.1(e) (§ 1784.31(j)).

This subdivision applies “in connection with the sale or financing of a vehicle” and does not mention leasing. How it applies to an ad that shows only a lease payment is not spelled out. Either way, compare any total price you were quoted with the agreed-upon value in the lease’s itemization (§ 2985.8(c)(2)(A)).

What the CARS Act does not do

• It does not create a cooling-off period for new vehicles, bought or leased (§ 1784.43(e)).
• It does not set vehicle prices, cap dealer profit, or regulate the money factor. Apart from the restocking-fee limits, it sets no dollar amount for any dealer charge.
• It does not direct any agency to write regulations, and the title names no enforcement agency or penalty amount. Its remedies are in addition to those under other law (§ 1784.22), which this guide does not cover.

Where to take a problem

Start with the dealer, in writing, and keep copies. Dealers must keep their own transaction and cancellation records for two years (§ 1784.44).

Neither the CARS Act nor the lease-contract statute names a complaint agency. Separately, a longstanding rule that SB 766 carried forward unchanged requires financed-purchase contracts to say that complaints may be referred to the city attorney, the district attorney, or a Department of Motor Vehicles investigator (§ 2982(h)). The lease-contract statute (§ 2985.8) has no matching notice.

The California DMV’s CARS Act page offers a dealer complaint form and lists the California Attorney General as a consumer contact. The page calls itself a summary, not the law. In places its wording is narrower than the statute; for example, it describes the cancellation right for “buyers,” while § 1784.43 says “buyer or lessee.” For a question about your own contract, talk to a California attorney.

A pre-signing checklist for a California lease

1. Is the vehicle new or used? If it is used, ask in writing whether the three-day right applies, and get the separate disclosure.
2. Did each written payment come with a written total, and with any down payment or trade-in value it assumes?
3. Did each written add-on offer say the product is not required? Is each product itemized in the gross capitalized cost?
4. Is the agreed-upon value in the lease at or below the total price you were quoted for the same vehicle? If it is higher, or an installed item appears both in that value and again as a separate line, ask the dealer to explain the difference.
5. Rebuild the effective monthly cost with your own figures in the lease calculator.