New California laws rewrite car-buying rules. What to know about the return policy reforms

California lawmakers made major changes to the state’s car-buying rules this year, including a controversial rewrite of the state law that allows buyers to get their money back if they are sold a defective vehicle and a right to return a used vehicle within three days.

After an intense lobbying push this year from automobile companies, dealers and consumer groups, more legislative battles over California vehicle purchases could follow in 2026. Sky-high car prices show no signs of falling, and a Republican-led Congress and the Trump administration have sought to thwart Newsom’s goal of having 100% of new cars sold in California be zero-emission by 2035.

Sen. Ben Allen, a Democrat representing the El Segundo area, said he expects California’s Democratic-controlled Legislature will likely push back against national Republicans’ attack on California’s vehicle policies in some form next year, though he said it wasn’t yet clear how.

“We’re very committed to this path, so stay tuned, but clean air is a priority for our state,” said Allen, who chairs the Senate’s Select Committee on Transitioning to a Zero-Emission Energy Future.

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In the meantime, Gov. Gavin Newsom signed Allen’s Senate Bill 766, creating a first-in-the-nation policy that allows a buyer to return a used vehicle for a full refund within three days if the purchase price was less than $50,000. Dealers can charge a restocking fee.

The law, which takes effect in October, also contains other protections for buyers intended to prevent them from getting suckered.

Car dealers will have to tell a potential buyer — including in advertisements and initial written communications — the actual price of a vehicle instead of an unrealistic advertised price. Potential buyers will also have to be informed of the full financing costs and lease terms. 

The law also prohibits dealers from charging for add-ons that have no benefit to the buyer, such as free oil changes for electric vehicles — which don’t need oil changes.

“That is a huge deal,” said Rosemary Shahan of Consumers for Auto Reliability and Safety, which championed the bill. “It’s historic. It’s going to make cars more affordable.”

Allen said he came up with the idea for the bill after shopping for a used car in 2024. He said he wanted to see what it was like trying to buy a used car in California and didn’t tell the various dealerships he visited that he was a state senator.

“I was kind of shocked by the hustle and the extent to which prices were quoted online and that ended up not really being truthful,” he said.

He ended up buying a 2021 Ford Mustang Mach-E, an electric vehicle.

Newsom blocked document fee increase

Most bills take effect immediately the year after they are signed, but lawmakers delayed the implementation of Allen’s bill until October to give dealers time to change their paperwork, amend their contracts and change their signs to meet the new law’s requirements.

Brian Maas, president of the California New Car Dealers Association, said the law should make buying a used car more transparent and easier for consumers.

“The bill certainly is a net positive in terms of more transparency about the total price and advertising,” he said.

But he said the new law “clearly imposed more responsibility on dealers,” which is why Maas said his group was extremely frustrated Newsom vetoed its bill that would have allowed dealers to raise document-processing fees by $175.

Senate Bill 791 would have raised the fees dealers can charge to process Department of Motor Vehicles and other paperwork from the current cap of $85 to up to 1% of the purchase price, capped at $260.

Maas said dealers were frustrated by Newsom’s veto message which said the fee increase wasn’t necessary because the state had imposed “no new state requirements” on car dealers.

Maas said it was “especially frustrating that the veto message somewhat cavalierly said there are no new state requirements when the governor signed just such requirements a week earlier.”

Before the veto, SB 791 passed the Legislature overwhelmingly and with bipartisan support. The California New Car Dealers Association has donated at least $3 million to legislators since 2015, according to the Digital Democracy database.

Maas said there are so many forms car buyers must fill out, almost all of them stemming from a law the Legislature passed, they’re getting to be like click-through agreements on websites that everyone just agrees to without actually reading.

“You shove form after form after form in front of consumers,” he said. “Consumers just tune it out, turn it off, and say, ‘You know what? I just want to know what my monthly payment is, what’s the interest rate, what the total price of the car is. And then let’s go. Why do I have to sit in here for a half hour or an hour and fill out all these forms?’ ”

Consumers face a watered-down lemon law

Newsom also signed Senate Bill 26, a bill that allows car manufacturers to opt out of changes to the state’s lemon law that gives consumers a right to get their money back if they buy a defective vehicle — sometimes referred to as a “lemon.”

The result is that California car buyers have different legal protections under the state’s lemon law depending on which brand they buy.

The bill Newsom signed was in response to a law lawmakers hastily passed at the end of the 2024 legislative session, watering down the state’s 55-year-old landmark lemon law. Some

auto companies, namely GM and Ford, were being sued so often for allegedly selling so many lemons that state courts were clogged with lawsuits.

The companies and some attorney groups persuaded lawmakers and Newsom to pass legislation in 2024 that shrank the length of time a car buyer could sue under the lemon law to just six years instead of the entire life of a vehicle’s warranty

Last year’s legislation also puts more onus on car owners to initiate claims, not auto companies.

But other companies that don’t get sued as often for selling defective vehicles, such as Toyota and Honda, opposed the rule change. Those companies said the new law didn’t give them time to prepare their best defense

Newsom ended up reluctantly signing the 2024 bill, but he urged the Legislature to come back with a new bill in 2025 that would allow companies to opt out of the changes. SB 26 passed overwhelmingly and Newsom signed it.

Meanwhile, several car companies, including Ford and GM and dozens of RV and motorcycle manufacturers, opted in to the 2024 law this year.

Toyota and Honda, as expected, did not.