Contact: Joseph Ridout, Consumer Action, 415-777-9648

June 28, 2006 - Starting July 1, Californians who buy new or used cars from auto dealers will have new rights and protections. The new law is the first in the nation to give auto buyers the right to return a used car within two days under certain circumstances.

"This law gives car buyers significant new rights, but also allows dealers to charge consumers for the used car return option," said Joe Ridout, Consumer Action's Consumer Services Manager. "The good news is that used car buyers who purchase the return option have the right to return the car for a refund—for ANY reason—before the deadline."

Consumer Action has teamed with the Sacramento-based non-profit auto advocacy organization Consumers for Auto Reliability and Safety (CARS) to educate consumers about the new law with a brochure in English, Spanish, Korean, Vietnamese and Chinese that will be distributed to thousands of community-based organizations statewide.

"Consumers need to do their homework in order to make the most of their new rights,” said Rosemary Shahan, President of CARS.

Click here for an online copy of the brochure in English. [Spanish version]

To order a printed copy of the brochure, send a self-addressed, stamped (39 cents) envelope to: Consumer Action-Car Buyers Guide, 221 Main St., Suite 480, San Francisco, CA 94105.

For assistance in using the new law, call Consumer Action’s free consumer assistance and referral hotline at: 415-777-9635 (English, Spanish and Chinese spoken).

The major provisions of the new law include:

For used cars sales only:

• Dealers must offer used car buyers a two-day return option for used cars priced below $40,000. Buyers who choose this option may return their vehicle for ANY reason and get a full refund, minus fees.
• Dealers will be allowed to charge used car buyers extra for the right to return the car for a refund, and they can also charge a "restocking fee." If the buyers pay for the return option, they must receive a credit for the same amount on the restocking fee.
• The amount dealers can charge for the return option and fees is capped, depending on the price of the car. These charges are negotiable, so consumers should shop around for the best deal. Some dealers already offer the return option at no extra charge.
• There is a prohibition against selling certain problem vehicles as "certified" used cars.

For both new and used cars sales:

• There is a prohibition on "loan packing" of add-on items (a common, sophisticated scam that involves deceiving the buyer about the price and claiming the items are free or add little to the monthly payment).
• There is required disclosure of the price of items commonly packed into loans, such as "theft etching," GAP insurance, or extended service contracts.
• There is required disclosure to consumers of their credit scores—in writing.
• There are caps on what dealers can receive as kickbacks from lenders in exchange for jacking up the interest rate on auto loans (the kickbacks, known as dealer “markups,” will be capped at 2.5% for loans of 60 months or less, and 2% for longer loans).

To use the used car return option, consumers must:

• Drive the car less than 250 miles (except if the dealer allows more miles, in writing).
• Return the vehicle within two days after purchase (except if the dealer allows more time in writing).
• Return the car in the same condition (except for "reasonable wear and tear" or “any defect or mechanical problem that manifests or becomes evident after delivery that was not caused by the buyer”).
• Personally deliver the originals of all the sales and related documents to the dealership.

Consumer Action (www.consumer-action.org) is a national non-profit consumer education and advocacy organization headquartered in San Francisco, CA, with offices in Los Angeles and Washington, DC.