The regulatory landscape facing California motor vehicle dealerships today is a high-stakes environment where the rules of the road are constantly shifting. For dealership professionals, navigating this terrain requires more than a basic understanding of sales; it demands a rigorous commitment to legal compliance with federal and state statutes, administrative regulations and evolving court decisions.

The complexity of this environment is only increasing with the upcoming implementation of the California Combating Auto Retail Scams (CARS) Act, set to take effect on Oct. 1, 2026. Notably, while a Federal Trade Commission (FTC) rule of a similar name was recently vacated by a federal appeals court, the California CARS Act, although much less burdensome than the FTC rule, will soon impose new obligations on dealers. This article provides a brief summary of certain advertising requirements to help dealerships with advertising compliance.

The Foundation: Sources and Standards of Law

To stay ahead, dealerships must recognize that advertising law is not a single set of rules but a multifaceted body of legal standards. The primary backbone of this framework consists of federal and state statutes. However, these statutes are given specificity and detail through regulations issued by government agencies, such as the FTC and state agencies. These agencies do not just write rules; they provide ongoing guidance and interpretations that reveal how they intend to enforce those laws in the real world. Furthermore, court decisions serve as essential benchmarks, interpreting how these laws apply to specific dealership scenarios.

In California, two specific codes form the bedrock of advertising rules: the Business and Professions Code Section 17500 and the Vehicle Code Section 11713(a). While the former applies to all businesses in the state, the latter is a specialized statute designed specifically for DMV license holders, including automobile dealerships. Together, they establish the industry’s “Golden Rule” for advertising: Advertisements must not be untrue or misleading.

The Regulator’s Perspective. When a regulator reviews your ad, they aren’t looking for your intent to deceive. It is irrelevant whether you intended to be honest or whether a consumer was actually harmed or relied on the ad. Instead, the standard is objective: Is an ordinary person likely to be misled or deceived by the advertisement? If the answer is “yes,” your dealership is at risk.

The Art of the Disclosure: Clear, Conspicuous and Consistent

Disclosures are the primary tool for staying compliant, but they are often misunderstood. To satisfy legal standards, every disclosure must be clear and conspicuous. In the fast-paced world of digital and print media, this means the advertisement must actively draw the reader’s attention to the fine print.

For written materials, “clear and conspicuous” translates to specific visual best practices:

• Size: The text must be large enough to be easily noticed and read by consumers.
• Contrast: There must be sufficient contrast between the text and the background.
• Purpose: A disclosure should never contradict the main message of the ad; its legal function is to clarify the offer or provide material terms, qualifiers and conditions.
• Video: In a video, a disclosure should remain on the screen long enough to be easily read and understood.

Price Advertising

Price advertising is a cornerstone of dealership marketing, but it is also the area where many legal landmines are buried. Under current standards, when you advertise a vehicle’s price, it must be the total amount a purchaser will pay.

What Is Excluded From the “Total Price?” California law is very specific about what does not have to be included in the advertised total price and allows the following to be excluded:

• Taxes and vehicle registration fees,
• The California tire fee,
• Emissions testing charges,
• Finance charges,
• Dealer document processing charges (see, however, the discussion that immediately follows), and
• Charges for electronic registration or transfer of the vehicle.

If these items are excluded, a mandatory disclosure statement is required, namely a disclosure substantially similar to the following: “Plus government fees and taxes, any finance charges, any dealer document processing charge, any electronic filing charge and any emission testing charge.” Note, however, on March 13, 2026, the FTC sent a warning letter to many dealership groups taking the position that the exclusion of any non-governmental fees, such as the dealer document processing charge, from an advertised vehicle price is illegal. Under these circumstances, a conservative approach to avoid a compliance issue with the FTC is to include any document processing charge in advertised prices. Excluding the document processing charge with proper disclosure as permitted by California law may be defensible, but this approach carries legal risk. Dealers are advised to monitor further developments on this point, including alerts from the California New Car Dealers Association.

The MSRP Trap. The advertised price is a ceiling, not a suggestion. Dealerships are legally prohibited from selling a vehicle for more than its advertised price. This can become tricky when the Manufacturer’s Suggested Retail Price (MSRP) is advertised for a specific vehicle. If you list an MSRP that is not the actual total price, you risk creating a misleading impression. Dealerships must be careful to ensure that a consumer doesn’t mistake a listed MSRP for the vehicle’s total price. The CARS Act will impact this, as discussed below.

The 2026 Shift: The California CARS Act Impact

Among other things, the California CARS Act represents a tightening of price transparency. Under this Act, the disclosure of the “total price” becomes mandatory in a wider variety of contexts:

1. Vehicle References: Any ad referencing a specific vehicle for sale must disclose the total price.
2. Monetary and Financing Terms: Any ad representing a monetary amount or a financing term for a specific vehicle must include the total price.
3. Direct Communication: The Act requires a total price disclosure in the first written communication to a consumer that mentions a specific vehicle, a monetary amount or a financing term.

Because the CARS Act requires the total price to be included in these situations, if the MSRP is not the total price for a specific vehicle advertised, the total price must be disclosed either alongside or instead of the MSRP.

Rebates: The “Net Cost” Calculation

Rebates are a powerful sales tool, but they are strictly regulated to prevent “phantom” pricing. Dealerships are prohibited from advertising their own dealer rebates, though factory rebates are permitted if they are expressed in specific dollar amounts.

These tips can help you stay compliant when advertising factory rebates.

• Math Transparency: A good practice has been to show the actual total price first, then show the deduction of the rebate, and finally display the resulting “net cost.”
• The “Anti-Stacking” Rule: You cannot “stack” conditional rebates, such as combining military, first responder and college student discounts, to reach an artificially low net cost that almost no customer could qualify for. Moreover, you should not advertise a rebate with conditions that conflict with the conditions of another rebate in the stack, or that cannot be combined with another rebate included in the stack. In its March warning letter, the FTC states that it is illegal to advertise a price that reflects rebates or discounts not available to all consumers. We are awaiting clarification on whether the FTC would also prohibit the use of such conditional rebates in price stacks and net cost calculations even when permitted in advertising under California law.
• Disclosure of Conditions: Any material requirement to receive a rebate (e.g., residency or military status) must be clearly stated.

Deep Dive: Vehicle Financing and Regulation Z

When advertising financing, you must be aware of “trigger terms” defined under Regulation Z. If your ad uses even one of these terms, you are legally obligated to provide a full suite of additional disclosures to ensure the consumer understands the true cost of credit.

The trigger terms of Regulation Z:

• The amount or percentage of the required downpayment
• The number of payments or the period of repayment
• The amount of any payment
• The amount of any finance charge

The Required Disclosures. Once a trigger is pulled, your advertisement must also include:

1. Downpayment Details: The specific amount or percentage downpayment required.
2. Repayment Terms: This includes the number of payments and either the specific monthly payment amount or the payment per unit of financing amount (e.g., payment per $1,000 borrowed).
3. The APR: The annual percentage rate must be clearly stated using that exact term or the abbreviation “APR.”
4. Credit Approval: Since credit approval is required, you must disclose that the offer is “on approved credit.” 

Furthermore, under the CARS Act, any advertisement containing these financing terms for a specific vehicle must also prominently disclose that vehicle’s total price.

Deep Dive: Leases and Regulation M

Leasing advertisements are governed by Regulation M, which operates on a “trigger” logic similar to Regulation Z but with its own set of specific requirements. Because leases are complex, regulators require more detailed disclosures to prevent consumers from being misled about their financial obligations.

The trigger terms of Regulation M:

• The amount of any payment (e.g., $399 per month)
• A statement of any capitalized cost reduction, or other payment, required when the lease starts, or that no payment is required (e.g., $1500 down, or $0 due at signing)
• Any mention of a required capitalized cost reduction

The Required Disclosures. If any trigger term appears, the ad must also disclose:

1. The Nature of the Transaction: You must explicitly state that the transaction is a lease.
2. Total Due at Start: The full amount the consumer must pay at the beginning of the lease.
3. Payment Schedule: The number of payments, the amount of each and their due dates.
4. Security Deposit: Whether or not a security deposit is required.
5. Mileage Terms: The mileage limitation and the specific charge for any excess mileage.
6. Tax and License: The statement “plus tax and license” if amounts due for use tax, license and registration fees are not included in the advertised lease payments, which is typical.
7. Credit Approval: Like financing, an “on approved credit” disclosure is mandatory.

The Equal Prominence Rule: If you advertise “$0 down” or a specific component of the total due at the start of the lease (other than the monthly payment amount), it cannot be more prominent than the total amount due at lease signing.

The Third-Party Myth: Why You Can’t Outsource Liability

A dangerous misconception is that external partners, such as advertising vendors or manufacturers, will handle the legal heavy lifting. If your dealership runs an ad that violates applicable law, you are responsible for it. Relying on a third party for compliance is typically not a valid legal defense.

The Vendor Gap. Many advertising vendors lack a deep understanding of California’s heightened compliance standards, which are often stricter than those in other states.

The Manufacturer Gap. Manufacturers often require ads to go through their own compliance processes for co-op reimbursement purposes. However, these compliance reviews are typically intended to protect the manufacturer’s brand and its advertising requirements, not to ensure the dealership meets all legal requirements. Furthermore, OEM-provided ad copy and disclosures are usually written for a national audience. They are often not tailored to California’s specific legal requirements or the unique needs of an individual dealership. In fact, disclosures that are perfectly legal for a manufacturer to use may not be legally compliant for a dealership.

The Price of Non-Compliance

The consequences of cutting corners on advertising compliance are severe. Beyond the immediate financial hit, a single misleading ad can trigger:

• Time-Consuming Lawsuits: These can drain resources and focus away from sales.
• FTC Consent Decrees: These can place a dealership under federal supervision and restrict its advertising, often for up to 20 years.
• DMV Actions: The DMV has the authority to suspend or revoke a dealership’s license for compliance failures.
• Criminal and Other Penalties: In extreme cases, fines, injunctions and even criminal charges are possible.
• Reputational Erosion: Misleading ads destroy customer trust and satisfaction, which are the lifeblood of a sustainable business.

Action Plan for 2026 and Beyond

To protect your dealership in this evolving environment, implement these three compliance strategies:

1. Establish Internal Accountability: Appoint a management-level employee to oversee and be personally accountable for all advertising law compliance.
2. Invest in Training: Ensure every employee involved in the creation or approval of advertisements is trained in current legal requirements.
3. Leverage Legal Counsel: There are many other advertising laws, and this article only scratches the surface. Work with experienced legal counsel to audit your existing materials, develop compliant advertising templates and provide a review of new campaigns. The California New Car Dealers Association also provides resources to help dealerships with legal compliance, including the California Auto Dealer Advertising Law Manual, authored by Manning, Leaver, Bruder & Berberich LLP.