Los Angeles Times
July 27, 2005

Car Buyers Aquire New Rights


California adopts the nation's toughest rules on used car sales, limiting the ways dealers can market vehicles and profit from loans.

By Jordan Rau, Times Staff Writer

SACRAMENTO – Gov. Arnold Schwarzenegger on Tuesday approved legislation giving California the nation's strictest limits on the ways car dealers can market used vehicles, profit off loans and slip in extraneous charges.

Dubbed the "Car Buyer's Bill of Rights," the legislation, which takes effect July 1, 2006, is the most substantial protection measure for automobile purchasers since 1982, when California's Lemon Law was signed and became a model for other states. Advocates and car dealers alike predicted components of the new law would be copied elsewhere.

"The motor vehicle industry in general produces superb products using medieval sales practices," said Stephen Brobeck, executive director of the Consumer Federation of America, a Washington, D.C., nonprofit group.

"The California Car Buyer's Bill of Rights will certainly provide protections for consumers that are taken for granted in almost any other product area."

But the new law falls short of the version the Legislature passed last year and Schwarzenegger vetoed. In the interim, the state's car dealers won a number of important concessions, including ones restricting the most highly touted provision of the law, a "cooling off period" that allows customers suffering buyer's remorse to return their car for a refund.

The new law makes it illegal to label or advertise a car as "certified" if it was ever in a significant accident, had major damage that had been repaired, or returned under warranty. The "certified" designation has gained increased popularity to indicate that an automobile, though used, has been rigorously inspected and refurbished.

The law also places limits on the profits dealers can make when they arrange loans and requires them to disclose to the customer their credit scores, which are used as the foundation for determining the price of the loans.

Some used car dealers have provided customers with loan rates much more expensive than what drivers could have obtained through a bank or other channels. Only Louisiana has such a law, and California's cap will be stricter.

"I know a lot of people like myself go get excited; it's their first car getting out of school and you don't think too much about interest rates," said Suzanne Tejeda, a 21-year-old bank claims representative from the Bay Area town of Clayton.

She said that when she purchased a certified Honda Accord in 2003, the dealer gave her a 9.7% loan even though she qualified for a 5.3% one. She said she ultimately sued the dealer after learning that her car, which had transmission problems, had been in a prior accident that the dealer did not mention.