Newsom vetoes car dealers’ bill to hike fees on buyers

Gov. Gavin Newsom vetoed a bill that would have allowed California’s car dealers to tack on another $175 in fees to the cost of buying a vehicle.

On Monday, Newsom announced he wasn’t going to sign Senate Bill 791, which would have raised the fees dealers can charge to process Department of Motor Vehicles and other paperwork from $85 to up to 1% of the purchase price, capped at $260.

In his veto message, Newsom said the fee increase made little sense since a car buyer would be paying a dealership “for only minutes of data entry.”

“At a time when Californians are already struggling with the high cost of living,” Newsom wrote, “this bill would raise the document processing fee to three times the current $85 cap – far beyond what an inflation adjustment would justify.”

Brian Maas, president of the California New Car Dealers Association, said in an emailed statement that the state’s car sellers “were extremely disappointed” by the veto.

Maas said the current $85 cap on the document-processing fee is “by far the lowest in the country.” The now-dead fee increase, he said, would still have been at “the bottom quartile of such charges across the nation.”

Car dealers argue that the Legislature continually passes new laws that add to their costs. They say other kinds of businesses are allowed to recoup those costs through service charges, but dealers can’t because the $85 cap is set in state law.

The dealers were especially frustrated with Newsom’s veto because he also signed a measure this month that adds a number of requirements on car dealers that are intended to prevent buyers from getting suckered as they haggle over the price of a vehicle.

Notably, that measure, Senate Bill 766, creates a first-in-the-nation policy that allows a used car buyer to return a vehicle for a full refund within three days if the purchase price was less than $50,000. Dealers can charge a restocking fee.

The new law requires dealers to disclose the full costs up front, and it prohibits dealers from charging for add-ons that have no benefits to the buyer, such as free oil changes for electric vehicles — which don’t need oil changes.

The law takes effect Oct. 1, 2026.

Maas said “the Legislature continues to place more burdens on dealers. SB 766 only added significantly to those responsibilities, which makes the veto of SB 791 all the more disappointing.”

The California New Car Dealers Association has donated at least $3 million to legislators since 2015, according to the CalMatters Digital Democracy database.

How did the fee increase easily pass?

It was perhaps surprising that the bill to hike fees made it to the governor’s desk at all, given that legislative leaders from both parties had promised to lower costs this year.

Yet the Senate overwhelmingly passed an earlier version of the bill that was even more expensive. It proposed upping the fee to $500.

Only one of the Legislature’s 40 senators, Calabasas-area Democratic Sen. Henry Stern, voted “no.”

After CalMatters reported on the controversial measure passing the Senate, its author, San Jose Democratic Sen. Dave Cortese lowered the proposed fee in the Assembly first to $350 and then eventually to $260.

Cortese said in an interview the amount the Legislature settled on would have provided the minimum dealers need to recoup their costs to pay employees who might “spend an hour and a half filling out documents” state regulations require for a single sale.

“There’s 113 different documents now that we’ve created,” he said. “Every single one of them is legislative created. … We were trying to get fair remuneration for fair work.”

In the Assembly, the bill passed with only three Democrats – Alex Lee of San Jose, Jacqui Irwin of Thousand Oaks and Tasha Boerner of Solana Beach – voting “no.” Seventeen other Assembly members didn’t vote at all, which counts the same as voting “no.”

As CalMatters reported, Democrats almost never vote “no” on their colleagues’ bills. Instead, they typically don’t vote at all. In the Capitol, it’s seen as a more polite way of saying “no” and less likely to lead to retaliation from other lawmakers and lobbyists.

With so much talk of lowering costs this year, Cortese said he could understand why the governor wasn’t as receptive to his arguments about fairness to car dealers as his colleagues in the Legislature were.

“The perception was stalking us the whole way through, no question about it,” Cortese said. “And I can understand why the governor would be sensitive to that.”

Rosemary Shahan of Consumers for Auto Reliability and Safety said she was “thrilled to bits” that Newsom vetoed the would-be “junk fee” increase and signed the law protecting car buyers from “the kind of bait-and-switch that goes on” when buying a vehicle.

She said the new three-day cooling-off period to return a vehicle will be especially helpful, allowing buyers to review their paperwork without pressure. They can also have their vehicles inspected by an independent mechanic to make sure they didn’t drive a lemon off the lot.

She called Newsom’s actions this year “huge wins for California car buyers.”

This article was originally published on CalMatters and was republished under the Creative Commons Attribution-NonCommercial-NoDerivatives license.