SB 766 three-day right to cancel: what used-car dealers must do

SB 766 three-day right to cancel: used vehicles sold at $50,000 or less in California from 1 October 2026, who gets it, how the days count and the refund.

From 1 October 2026, a California dealer cannot sell or lease a used vehicle at retail for $50,000 or less without giving the buyer a three-day right to cancel. The right comes from SB 766, the California Combating Auto Retail Scams (CARS) Act (Chapter 354, Statutes of 2025), which adds Civil Code sections 1784.20 to 1784.44. It replaces the paid two-day contract cancellation option that dealers have offered under Vehicle Code 11713.21 since 2012.

The buyer pays nothing for the right and cannot waive it. You may charge a restocking fee when the buyer cancels, the buyer must bring the vehicle back inside the window and under 400 miles, and you must refund within 48 hours.

Who gets the right

The rule is in Civil Code 1784.43(a)(1):

(A) A dealer shall not sell or lease a used vehicle at retail at a price equal to or less than fifty thousand dollars ($50,000) without providing the buyer or lessee with a three-day right to cancel the purchase or lease. (B) The right to cancel does not apply if the used vehicle has been driven more than 400 miles between the execution of the sale or lease agreement and the date on which the buyer or lessee attempts to exercise the right.

Three definitions in Civil Code 1784.31 decide whether a deal is in or out:

• "Dealer" means a licensed California motor vehicle dealer or a dealer as defined in Vehicle Code 285, so independent lots and autobrokers are in.
• "Vehicle" means a motor vehicle under Vehicle Code 415, but not a wholesale sale, a vehicle not required to be registered, a fleet sale, a sale to a commercial purchaser, or a vehicle with a gross vehicle weight rating of 10,000 pounds or more.
• "Used vehicle" means a vehicle that is also a used vehicle under Vehicle Code 665, and it never includes a motorcycle (Vehicle Code 400).

Leases count: the section says "sell or lease" and "buyer or lessee" throughout.

The $50,000 line

The statute uses "a price equal to or less than fifty thousand dollars" in subdivision (a) and "a purchase price greater than fifty thousand dollars" in subdivision (g). A vehicle at exactly $50,000 is covered. It does not define "price" for this section, and it does not say whether taxes, government fees, a document fee or add-ons count toward it. The separate "total price" definition in 1784.31(j) is written for advertising and is not cross-referenced here.

The DMV had not published guidance on this point as of September 2026, and its own summary of the new laws says "under $50,000", which is looser than the statute. The mandatory sign and contract paragraph say "A USED VEHICLE FOR $50,000 OR LESS", which points to the vehicle's selling price, so treat any deal where the vehicle price is $50,000 or less as covered.

How the three days are counted

The count is in Civil Code 1784.31(i):

(1) "Three-day," as used in the phrase "three-day right to cancel," means the period in which a buyer or lessee of a used vehicle may exercise the right to cancel the purchase or lease as provided in Section 1784.43. Except as provided in paragraph (2), this period consists of the three calendar day period commencing the calendar day after the purchase or lease is executed. (2) If the third day in the three calendar day period described in paragraph (1) falls on a day the dealership is closed to the public, the three-day right to cancel period extends to the next day the dealership is open to the public. (3) The three-day right to cancel ends at the close of business on the last day of the period described in this subdivision.

The days are calendar days, so Saturdays and Sundays count. The signing day is day zero. Only a closed third day extends the period; a closed day one or day two does not.

"Close of business" is not defined. A buyer who arrives five minutes before your posted closing time on the last day is inside the window, so write your hours on the cancel notice.

SB 766 has no transition clause: the title is operative on 1 October 2026 (Civil Code 1784.28), so a contract signed on 30 September 2026 falls under the old contract cancellation option and one signed on 1 October under the new right.

The 400-mile limit

The right disappears if the vehicle "has been driven more than 400 miles between the execution of the sale or lease agreement and the date on which the buyer or lessee attempts to exercise the right." Record the odometer on the cancel notice at delivery and again when the vehicle comes back.

Miles 251 to 400 are still inside the right but cost the buyer $1 each, capped at $150. The fee arithmetic is in /california-sb-766/sb-766-restocking-fee-mileage-refund/.

What the buyer must bring back

The cancel notice you hand the buyer must state that the right applies only if all of the following are personally delivered to you, during business hours, at the moment the buyer cancels (Civil Code 1784.43(b)(6)):

• The restocking fee, except to the extent you deduct it from the refund.
• The vehicle, free of all liens other than the one created by the sale itself, and in the same condition as delivered, allowing for reasonable wear and tear and for any defect or mechanical problem that showed up after delivery and was not caused by the buyer.
• Any other cash or items the buyer received in connection with the sale or lease.

You may require the buyer to sign documents reasonably necessary to unwind the deal (1784.43(b)(7)). If you claim damage beyond reasonable wear and tear, keep documentation describing it; claiming it "without reasonable basis" is a violation (1784.43(c)(7)).

Refund, restocking fee and trade-in

When the buyer cancels, Civil Code 1784.43(d) gives you 48 hours to cancel the contract and pay a full refund minus the restocking fee. Bank and card issuer delays are not counted against you. If the buyer paid by check or another method without an immediate verified transfer, you may hold the refund until two business days after the payment clears, with a document showing when that happened.

A trade-in goes back to the buyer with all its keys. If you have already sold it or started the title transfer, you owe the greater of the value in the contract, the amount you sold it for, or its fair market value, less any lien you paid off on it. You must give the buyer a receipt showing the date and time of cancellation and an itemized breakdown of every deduction. The full mechanics, including how fair market value is established, are in /california-sb-766/sb-766-restocking-fee-mileage-refund/.

What you cannot do

Civil Code 1784.43(c) lists eight acts that are violations in their own right:

1. Anything that impedes the buyer from exercising the right.
2. Overcharging the restocking fee.
3. Withholding the down payment or trade-in after the right is exercised.
4. Failing to refund the down payment on time.
5. Failing to refund the amount owed for a trade-in you have sold.
6. Failing to give the buyer the receipt or contract for the sale of the trade-in.
7. Claiming damage beyond reasonable wear and tear without a reasonable basis.
8. Claiming the person who can return the down payment or trade-in is not available.

Civil Code 1784.21 adds that any waiver of the title by a consumer "is contrary to public policy and is unenforceable and void." A signed "I decline the three-day right" form has no effect.

What happens to the old two-day option

Vehicle Code 11713.21, which required a paid contract cancellation option on used vehicles under $40,000, is repealed as of 1 October 2026 (SB 766, section 10). The old notice box in Civil Code 2982(r) and the old wall sign in Vehicle Code 11709.2 are repealed the same day and replaced by the wording in /california-sb-766/sb-766-notice-wall-sign-contract-warning/. Revenue and Taxation Code 6012.3 is rewritten so that the refunded portion of the sales price and any restocking fee are excluded from gross receipts for sales tax. You may offer more than the statute requires, such as a longer window or a smaller fee (1784.43(j)), and adjust the notices to say so.

The right to cancel is the only part of the CARS Act with a $50,000 ceiling. The total price and add-on rules in /california-sb-766/sb-766-total-price-advertising-rules/ apply to every vehicle you sell.

How the right is enforced

SB 766 sets no fine of its own and creates no express private right of action. Civil Code 1784.22 says the remedies for a violation "shall be in addition to any other remedies available under other law." In practice that means the tools already used against dealers: the Unfair Competition Law (Business and Professions Code 17200), the Consumers Legal Remedies Act (Civil Code 1750 and following), actions by the Attorney General and district attorneys, and DMV licensing discipline. Civil Code 1784.30 tells courts to construe the title liberally in favor of buyers.

What to keep on file

Civil Code 1784.44 requires records that show compliance to be kept for two years from the date each record is created. For the right to cancel, that means at minimum:

• The signed purchase or lease agreement with the first-page cancellation paragraph.
• The separate "3-Day Right to Cancel Used Car Purchase or Lease" disclosure, in English and, where the deal was negotiated primarily in Spanish, Chinese, Tagalog, Vietnamese or Korean, in that language too.
• Odometer reading at delivery and, if the vehicle comes back, at return.
• Every cancellation request, the cancellation receipt with date, time and itemized deductions, proof of the refund and proof of return of the trade-in (or the redacted sale document for the trade-in).
• Photos or a written condition report if you claim damage beyond wear and tear.
• Written complaints about the sale or the cancellation.

The DMV's general three-year rule (13 CCR 272.00) and the seven-year rule for financed contracts (Civil Code 2984.5) still apply on top. The full list is in /california-sb-766/sb-766-compliance-checklist-independent-dealers/.

Frequently asked questions

Sources

• SB 766 (Chapter 354, Statutes of 2025), chaptered text, California Legislative Information
• Civil Code section 1784.43 (three-day right to cancel), California Legislative Information
• Civil Code section 1784.31 (definitions: three-day, restocking fee, used vehicle), California Legislative Information
• Vehicle Code section 11713.21 (contract cancellation option, repealed 1 October 2026), California Legislative Information
• DMV highlights new laws in 2026, California DMV
• CARS Act (SB 766): major changes coming October 1, 2026, California Dealer Academy
• California's CARS Act (SB 766) is official: what auto dealers must know, Madison Law APC

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