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The California Legislature determined that used car dealers were selling some awful used cars and trucks, so in 2012 it passed AB 1215, to assist consumers to cancel a purchase contract, if they paid a reasonable fee to the dealer.  This law was codified as Cal. Civil Code 11713.21.  The law is the legislative compromise between consumers and car dealers, in that the dealer gets to charge the consumer a fee for this legal right to cancel for any reason.  However, consumers and car dealer should note that this law is not the only reason that consumers may cancel their purchase of a vehicle and Subdivision (g) specifically states: “This section does not affect the ability of a buyer to rescind the contract or revoke acceptance under any other law.”  As an example, breach of warranty, fraud or misrepresentation is a viable legal means to cancel a used vehicle sale and should not be overlooked by the buyer or their attorneys.

The Contract Cancellation Option does not apply to all  used vehicle sales. In particular, the law excludes motorcycles, recreational vehicles (such as, motor homes, travel trailers, truck campers and camping trailers), and vehicles sold with a purchase price of $40,000 or more.  Why the Legislature excluded motorcycles and RVs, and decided that consumers of more costly used vehicles did not need these protections is something that should be considered and revised in future legislative sessions.  The statute also only protects those who aquired the vehicle “at retail to an individual for personal, family, or household use.”  Thus, only consumers can expect to be given the contract cancellation option, but nothing prohibits a dealer from offering the cancellation option to others buyers.

There is a minimum amount of days that the dealer must allow for the buyer to excerceise his or her right to cancel.  The contract must provide at least two business days from date of delivery.  The statute prohibits the contract from giving too little time to cancel or “that is earlier than the dealer’s close of business on the second day following the day on which the vehicle was originally delivered to the buyer by the dealer.”  The law requires several other items that the contract must clearly state.

Dealers are not permitted to charge an exorbitant price for the option to cancel the contract.  The statute states certain maximum prices that can be charged for the contract cancellation option.  For example, vehicles sold for $5,000 or less cannot be asked to pay more than $75 for the option to cancel.  For vehicles over $5,000 through $10,000, the maximum charge may be $150.  Up to $250 for used vehicles priced between $10,000 and $30,000.  Between $30,000 and under $40,000, the cancellation option shall be one-percent (1%) of the vehicle cash price.

How is the Cash Price determined?  The Statute incorporates the definition found in Cal. Civil Code, Section 2982, Subdivision (a)(1)(A), which states: “ The cash price, exclusive of document processing charges, charges to electronically register or transfer the vehicle, taxes imposed on the sale, pollution control certification fees, prior credit or lease balance on property being traded in, the amount charged for a service contract, the amount charged for a theft deterrent system, the amount charged for a surface protection product, the amount charged for an optional debt cancellation agreement, and the amount charged for a contract cancellation option agreement.”  The definition in the Statute “also excludes registration, transfer, titling, and license fees, the California tire fee, and any charge to electronically register or transfer the vehicle.”

The dealer must present the prospective buyer of a used vehicle with a separate document stating they have the option, how soon the option must be excercised, and showing the buyer the cost to obtain the option.  The Legislature was wise and required it to be on a separate document, to prevent dealers from simply adding it into the fine print boilerplate on form contracts that they have buyers sign in many places and are already over two feet long.

How does the buyer exercise their right to cancel option?  The statute explains this in Subdivsion (b)(7). In essence, the buyer must timely deliver “personally” to the dealer (1) a written notice within the specified time; (2) payment of the specified restocking fee minus, minus the purchase price of the contract cancellation option; (3) the originals of the contract cancellation option agreement, the vehicle purchase contract, related documents, and vehicle titling and registration documents, and (4) the vehicle in substantially the same condition, with reasonable wear and tear and any defects that the buyer did not cause, within the mileage specified on the purchase option contract.  The buyer may also need to sign any documents reasonable and necessary to complete the cancellation processs and refund.

How long can it take to process the buyer’s refund of the down payment?  The Legislature states that the refund must be provided a full refund by the second day after exercising the right to cancel.  This includes the sales tax on the transaction.  How this language actually is processed by a dealer will be determined under the circumstances, but I would recommend that the buyer ask for the refund immediately or to be called when the check is ready, so that they can come by and pick it up at the dealer’s premises.  No one wants to wait for a check to arrive in the U.S. Mail, when they have no vehicle, so I would also make notes of everything that is said or promised by the dealer including the date, time, name, title and what was said or promised specifically.  Having a witness present during this is also useful, as the process may be overwhelming and you’ll want to have someone else who can recall what was said.