Conditional Sales Contracts & California Civil Code

Conditional Sales Contract

Licensed Dealers and Brokers must provide Buyer(s) with copies of the Conditional Sales Contract, in writing, that includes:

1. A Contract Cancellation Option* with a “2-day cooling-off period” (not required for motorcycles, off-highway vehicles, RVs, commercial vehicles and vehicles over $40k)
2. All costs and terms of payment
3. Written Disclosure(s) for any aftermarket add-on items
4. All financial aspects of the sale
5. Signatures of both the Buyer and the Seller
6. Disclosures covered in the “Truth in Lending” (if the buyer is financing)

If the Contract is not executed, any payments made by the Buyer must be refunded

Negotiating in Other Languages

California law Civil Code requires that Dealers who primarily negotiate a deal in Spanish, Chinese, Tagalog, Vietnamese, or Korean to provide a translation of any Contract or Agreement in the language the deal was negotiated before signing the English version.

If a dealer is found to violate the Civil Code, a Court or Arbitrator can order the contract unwound. This could lead to legal action including punitive damages, and an award of attorneys’ fees.

Whenever possible, utilize bilingual documents that contain both English and the other language you are negotiating.

*There is no “cooling off” period unless the Buyer purchases a Contract Cancellation Option Agreement

Details of All Costs and Terms of Payment

The Contract must include all financial aspects of the sale including (but not limited to):

• Taxes (imposed on the cash sale)
• Accessories
• Services related to the sale such as delivery, installation, alterations, modifications, and improvements
• Document preparation fees
• Service contracts
• Contract Cancellation Option Agreement
• Payment of a prior credit or lease balance remaining on the vehicle being traded in
• Amounts paid to public officials for the vehicle license fees, registration, transfer, and titling

When the Buyer is financing, the Conditional Sales Contract must also contain additional disclosures covered in the “Truth in Lending” section

Contract Cancellation Option Agreement

This Option must be offered on all used vehicles except:

• Cars priced at $40,000 or more
• Motorcycles
• Off-road vehicles
• Recreational vehicles
• Vehicles sold for business or commercial use

The optional Contract Cancellation Option Agreement allows the Customer to change their mind on the purchase and return the vehicle to the Dealer.

There is no “cooling-off” period unless your Buyer obtains a Contract Cancellation Option Agreement.

Maximum Fees You May Charge

Cancellation Option

• $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 less than $40,000.

Vehicle Restocking**

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

Dealers must deduct Contract Cancellation Option Agreement Fee from the Restocking Fee

Valuable Reference Links

• Automobile Sales Finance Act
• Car Buyer’s Bill of Rights (FFVR 35)