California’s CARS Act Makes First Communication Compliance Critical By Mark Sanborn, Senior Product and Regulatory Counsel, ComplyAuto California’s new Combating Auto Retail Scams (CARS) Act will require dealerships to make major changes to their sales and finance operations. Effective Oct. 1, 2026, the Act imposes broad requirements affecting advertising, customer communications, payment disclosures, add-on sales, cancellation rights, signage and record retention. This is not a minor disclosure update; it is a sweeping operational law that touches multiple departments and customer interactions, from marketing and internet leads to showroom sales and F&I. Major Provisions Dealers must clearly and conspicuously disclose the total price in advertisements that reference a specific vehicle for sale or include a monetary amount or financing term for a specific vehicle. Dealers must also disclose the total price in the first written communication that refers to a specific vehicle for sale or includes a monetary amount or a financing term for any vehicle. The total price includes all items installed on the vehicle and any price adjustments, but excludes taxes and certain fees permitted by law, including the dealer document processing charge. Dealers will need to ensure their advertising processes, website listings and vendor tools align with the Act’s total price requirement. However, on March 13, 2026, the FTC sent warning letters to 97 dealer groups alleging deceptive advertising practices. The letters make clear that advertised vehicle prices must include all mandatory fees, including document processing fees, and may exclude only required government charges. The FTC reaffirmed in an April 17, 2026, webinar with NADA that document fees must be included in the total price in all states. Dealers should review the letters and consult counsel before continuing to exclude document processing fees. The Act also reaches payment-related communications. If a dealer discusses monthly payments or compares payment options in the context of a sale or lease, additional disclosures are required. These include the total amount the consumer will pay at that payment level and a statement that lower monthly payments may increase the total amount paid over time. Add-on products and services are another major compliance area. Dealers must disclose that the consumer can buy or lease the vehicle without the add-on. The Act also restricts dealers from charging for add-on products that do not provide a real benefit to customers. Dealers will need to review their product offerings, provider relationships and supporting documentation to ensure their add-ons are compliant. The Act also creates a three-day right to cancel for many used-vehicle retail sales and leases priced at $50,000 or less. This replaces the current optional contract cancellation option that dealers must offer for certain used vehicles. Dealerships will need well-defined procedures to handle cancellations and trade-ins correctly and avoid expensive mistakes. The Act also affects signage, including updates to “no cooling off” notices. Record retention is another key requirement. Dealers must keep records demonstrating compliance with the Act for at least two years. That includes records related to advertisements, disclosures, written communications, signed transaction documents, cancellation activity and support for add-on compliance. A Closer Look at First Communication Compliance Among all of these new obligations, one of the most difficult in day-to-day operations may be the first written communication rule. The first written communication requirement can apply across email, text, chat, direct messages, CRM-generated responses and website auto-responses. For many dealerships, this presents a real implementation challenge because first responses often happen quickly, across multiple systems and sometimes automatically. ComplyAuto Guardian is designed to address the major compliance requirements created by the California CARS Act and integrates directly with dealership CRM workflows. Through a unique “magic link” placed into first-response templates for email, text and chat, the system helps ensure that outbound first communications automatically include the disclosures required by the CARS Act, including the total price. The California CARS Act will require broad operational changes in advertising, disclosures, add-on practices, cancellation handling, trade-in procedures and recordkeeping. Dealers should begin planning now. Those who prepare early and adopt tools built for these requirements will be in a far stronger position to meet the Act’s demands. 26
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