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All Used Car Sales Are NOT Final

Lyndon Bell
by Lyndon Bell
March 18, 2011

While it is generally accepted all used car sales are final, this is not the case. It is true in all transactions between private parties and when buying from dealers in most states. But, when buying a used car from a car dealer in California, it is not true.

On July 1, 2006, the Car Buyer's Bill of Rights went into effect in California, giving used car buyers the ability to cancel a sales contract within 48 hours. That's right: in the state of California; if you buy a used car from dealer (described as any entity that sells six or more cars a year), you have the right to purchase a two-day sales contract cancellation option.

Yes, you read that correctly, you have to PURCHASE the option to do so. However, to prevent dealers from making the fee so exorbitant that nobody ever takes advantage of their rights, the pricing structure has been set by the state as follows:

  • $75 for a vehicle costing $5,000 or less
  • $150 for a vehicle costing more than $5,000, but not more than $10,000
  • $250 for a vehicle costing more than $10,000, but not more than $30,000
  • One percent of the purchase price for a vehicle costing more than $30,000, but not more than $39,999.99
  • Vehicles costing $40,000 or more are not eligible under the law

Dealers are also entitled to charge a restocking fee if a vehicle is returned. That pricing schedule has been set by the state as follows:

  • $175 for a vehicle costing $5,000 or less;
  • $350 for a vehicle costing more than $5,000, but less than $10,000; or
  • $500 for a vehicle costing $10,000 but less than $40,000.

As you might well imagine, there are a number of caveats that must be met in order for the law to be enforceable. After all, what's to prevent somebody from buying a car in San Francisco on Monday, driving it to Utah and back on Tuesday while using it in series of drag races, breaking a bunch of traffic laws, and putting it up as collateral on a loan, before returning it for a refund just in time to take advantage of the 48 hour rule on Wednesday?

Under the stipulations of the Car Buyer's Bill of Rights, the buyer must return the vehicle:

  • To the dealer he or she bought it from by close of business within two days, or more, if allowed by the contract
  • With no miles in excess of those permitted by the contract (the dealer may limit the number of miles a vehicle can be driven during the contract cancellation period, but it may not be a number less than 250 miles)
  • With all original receipts of the sales and cancellation option contracts
  • In the same condition as it was received, except for reasonable wear and tear and any defects or mechanical problems occurring after the buyer takes possession of the vehicle; and
  • Free of all liens and encumbrances, other than any lien or encumbrance created by the sales contract

If the car is returned in compliance with the law, the dealer must give the buyer:

  • A full refund, including sales tax, any registration fees, and any deposit or trade-in vehicle collected from the buyer. (Note: The fee charged for the contract cancellation option is non-refundable. If the dealer did not charge for the option and has sold or transferred title to the vehicle that the buyer used as a down payment or trade-in, the fair market value or value stated in the sales contract, whichever is greater, must be refunded.)
  • If the buyer has not returned the vehicle by the standards set above, the dealer has the right to refuse to accept return of the vehicle; however, written notice must be provided to the buyer

This goes a long way toward removing much of the risk of buying a used car. Plus, it gives a buyer time to live with the car in their day-to-day lives and decide if they've really made the best purchase possible. Don't be surprised if you have to ask though. Odds are, most dealers won't tell you about this.


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