California's Add-On Law Just Changed. Here's Which Plans Are Optional.

California's Combating Auto Retail Scams (CARS) Act took effect on October 1, 2026. Dealers there must now say in writing that add-ons such as service contracts, GAP or paint protection are not required, and can't charge for add-ons with no benefit to you. For buyers in every state, the lesson is that most service plans sold with a car, appliance or home system are optional, however mandatory the pitch sounds. Only a few purchases truly come with a plan attached, and each works differently.

Key takeaways

Federal law bars a manufacturer from making its warranty depend on your buying a brand-name part or service, unless that part or service is free under the warranty or the FTC grants a waiver.
Since October 1, 2026, California dealers that describe an add-on in writing must disclose that it is not required. A similar national FTC rule was struck down in court on January 27, 2025.
Real ties exist: phone promo credits that require a qualifying plan, lender-required coverage (which then counts as a finance charge) and items a dealer has already installed.
In an illustrative example, $3,000 of add-ons financed at 8% APR over 72 months adds $52.60 a month and costs $3,787.18 in total, so $787.18 goes to interest.
In California, a service contract on a vehicle with a manufacturer's warranty can be cancelled for a full refund within 60 days if no claim has been made. The window is 30 days for appliances, home electronics and used cars without a manufacturer's warranty.

What it means for you

Buying a car in California: written add-on offers must say the add-on isn't required, the advertised price must include installed items, and most used cars priced at $50,000 or less get a 3-day right to cancel. See the car section.
Buying a car anywhere else: no federal rule requires that disclosure, but falsely calling an add-on required is at the center of several FTC cases. See the car section.
Financing any purchase: a financed add-on accrues interest for as long as the loan runs. See the cost example.
Installing HVAC, solar or a home battery: warranties can set conditions such as registration (where state law allows it), maintenance or an internet connection, but not a paid, brand-name plan. See the home section.
Buying appliances or electronics: the store's protection plan is an optional service contract. See the home section.
Buying a phone on a carrier deal: the plan you're tied to is the wireless plan; at Verizon, for example, 36-month promo credits stop if you cancel the line or switch to a plan that doesn't qualify. See the phone section.

Optional, required or bundled

A warranty comes with the product and is included in the price. A service contract, often sold as an "extended warranty" or "protection plan," costs extra and is a separate agreement, as the FTC's Businessperson's Guide to Federal Warranty Law explains. An add-on is any extra product sold with the purchase or loan, such as GAP, a service contract or a coating.

The key federal rule is the anti-tying provision of the Magnuson-Moss Warranty Act, 15 U.S.C. 2302(c). It says a warrantor may not make a warranty depend on your using an article or service "identified by brand, trade, or corporate name." There are two exceptions: the item is provided free under the warranty, or the FTC grants a waiver after the company shows the product works properly only with that item and the FTC finds the waiver is in the public interest.

The FTC's guide lists as illegal a warranty voided by "failure to have scheduled maintenance performed, at your expense," by a named company. The company may still refuse to cover damage caused by parts or service it didn't provide; it just can't void the warranty because someone else did the work.

Situation	Can it be required?
Warranty kept only if you buy the maker's or a named company's paid service	No, unless free under the warranty or waived by the FTC
Coverage denied for damage caused by someone else's faulty repair	Allowed, for that damage only
Dealer says an optional add-on is mandatory	No; the FTC treats this as deceptive (cases below)
Dealer item already installed on the car	It can be priced in; in California it must be in the advertised total
Lender requires GAP or credit insurance	Yes, but its cost counts as a finance charge under Regulation Z
Phone promo credits	Yes, credits continue only on a qualifying plan

On October 27, 2022, the FTC approved final orders against Harley-Davidson, Westinghouse outdoor-equipment maker MWE Investments and grill maker Weber over warranty terms that discouraged third-party parts or repairs. On July 3, 2024, FTC staff sent warning letters to eight companies, including makers of air purifiers, treadmills and gaming hardware, over claims that buyers had to use specified parts or providers and over "warranty void if removed" stickers. Both came after the FTC's May 2021 report to Congress, Nixing the Fix, on repair restrictions.

Car add-ons and the new law

The federal rule that was vacated

The FTC's CARS Rule, finalized in January 2024, would have required dealers nationwide to get buyers' express, informed consent for add-on charges and would have banned add-ons with no benefit. On January 27, 2025, the Fifth Circuit vacated the rule by a 2-1 vote in National Automobile Dealers Association v. FTC. The court found the FTC had skipped a required first step, an advance notice of proposed rulemaking, and did not reach the other challenges to the rule's content.

The FTC has kept bringing deception cases. In December 2024, it and Illinois announced a $20 million settlement with Leader Automotive Group, to be used for refunds. They alleged that salespeople called pre-installed coatings and theft protection required although they weren't in the advertised price; in a survey, nearly 80% of Leader customers had been charged for at least one add-on without authorization or after being falsely told it was required. The court entered the stipulated order against the companies on January 2, 2025; the case continues against one former executive.

On April 2, 2026, the FTC and Maryland's attorney general announced a proposed order with Lindsay Automotive Group. It alleged charges for extra service plans, tire and rim protection and GAP that buyers did not want or agree to; consumers charged a total of more than $75 million from April 2020 through December 2025 may be eligible for refunds, and Lindsay will pay a $3.1 million civil penalty to Maryland. A third case, against Asbury Automotive Group, makes similar allegations, which have not been proven; on September 3, 2026, it was withdrawn from adjudication for 60 days while the FTC considers how to resolve it.

What California now requires

Under the text of SB 766, signed in October 2025:

Disclosure: any written statement about an add-on during negotiations for a specific vehicle, new or used, must be paired at least once with a disclosure that it's not required.
No-benefit charges banned: examples include oil changes for an electric vehicle, nitrogen fills below 95% purity and service contracts void because of a pre-existing condition.
Installed items: the "total price" a dealer must show includes items already installed on the car.
3-day cancellation: covers used cars priced at $50,000 or less, for three calendar days starting the day after signing (extended to the next open day if the dealership is closed on the third day). The car must come back in the same condition, apart from normal wear, and driven no more than 400 miles since signing. The dealer may keep a restocking fee of 1.5% of the sale price ($200 minimum, $600 maximum), plus $1 a mile over 250 miles, capped at $150. It must cancel the contract and refund the rest within 48 hours.

Two limits matter. An add-on is defined as something "not provided by the manufacturer," so factory equipment and automaker plans fall outside these rules. And the law doesn't make a dealer remove an installed item; it controls how the item is priced and described.

What a financed add-on costs

According to the CFPB's fall 2024 auto finance Supervisory Highlights, consumers generally finance add-ons when the loan is made: the price is paid upfront and included in the amount financed, so you pay interest on it for as long as the loan runs. The monthly cost is:

M = P × r / (1 − (1 + r)^(−n))
Total interest = M × n − P

Here P is the add-on price added to the loan, r is the APR divided by 12, and n is the number of monthly payments.

Illustrative example. Suppose a $2,200 service contract and $800 of paint and fabric protection, $3,000 in all, are added to a car loan at 8% APR.

Loan term	Added monthly payment	Total paid for the add-ons	Interest on the add-ons
60 months	$60.83	$3,649.75	$649.75
72 months	$52.60	$3,787.18	$787.18
84 months	$46.76	$3,927.73	$927.73

On the 72-month loan, the add-ons cost about 26% more than their sticker price, and a longer term lowers the payment but raises the total. The CARS Act makes California dealers that compare monthly payments warn that lower payments often mean paying more overall.

Cancelling later gets back only part of the price. California's Civil Code section 1794.41 gives a full refund within 60 days if no claim has been made, for a car with a manufacturer's warranty. After that, the refund is pro rata by elapsed time or by use, such as mileage, at the seller's option as stated in the contract, less a fee of 10% of the contract price or $25, whichever is less.

If the $2,200 contract runs 60 months and you cancel after 24 with a time-based refund: $2,200 × 36/60 = $1,320, minus $25, leaves $1,295. On a financed contract, the refund may go to the lender instead of to you.

Homes, appliances and phones

HVAC, water heaters and furnaces

Home equipment such as air conditioners, furnaces and water heaters counts as a consumer product under 16 CFR 700.1, so the anti-tying rule applies. In one Carrier gas furnace warranty (2019 edition), the original owner's parts coverage is 10 years only if the furnace is registered within 90 days of installation, otherwise 5, except in California, Quebec and other places that ban registration conditions. It also requires a licensed HVAC technician and normal maintenance per the manuals, and generally doesn't cover labor.

An equipment warranty voided unless you buy a named company's paid maintenance would match the FTC's illegal example; a contractor's own labor guarantee is a separate promise, so get its terms in writing before signing a maintenance agreement.

Solar and home batteries

Tesla's Powerwall 3 warranty page says the full 10-year warranty requires a reliable internet connection for firmware updates. Without it, if Tesla can't reach you, coverage may be limited to 4 years. If an installer sells a monitoring or maintenance package, check whether the product warranty actually lists it as a condition.

Appliances and electronics

A protection plan sold at the register is an optional service contract. The FTC's consumer guide on service contracts, written about cars, warns that a service contract may duplicate the manufacturer's warranty, a check that works for a refrigerator or laptop too. In California, home appliance and home electronics service contracts can be cancelled for a full refund within 30 days if no claim has been made, under section 1794.41.

Phones on a carrier deal

Here a plan really is tied to the purchase: your wireless plan. According to Verizon's device deal FAQs, promo credits are paid over 36 months, and they stop if you cancel the line, pay off the device early, do an early upgrade or move to a plan that doesn't qualify. If you close the line, Verizon charges the remaining device balance in full on your final bill.

Frequently asked questions

Does buying the store's protection plan change my other warranty rights?

It can help you. Under 15 U.S.C. 2308, a supplier that enters into a service contract with you on a product at the time of sale, or within 90 days after, can't disclaim the implied warranties on that product. An implied warranty is the basic legal promise that a product works as it should, so that seller can't sell you the item "as is." If it also gives a written warranty, it may limit the implied warranties to that warranty's length.

Can a lender require GAP coverage to approve a car loan?

A lender can make GAP, a type of debt cancellation coverage, a condition of the loan, but then its fee counts in the finance charge and the disclosed APR. Under Regulation Z, section 1026.4(d)(3), the fee can be left out of the finance charge only if the coverage is not required and that is disclosed in writing, the fee is disclosed in writing, and you sign or initial a written request for it. Regulation Z covers consumer loans up to $73,400 in 2026 unless they are secured by real estate, according to the CFPB's 2026 threshold adjustment, so a larger car loan falls outside this rule. The official commentary places GAP under this rule.

Will using an independent shop for oil changes void my car warranty?

Not by itself. The FTC's guide to auto warranties says it is illegal for a dealer to deny warranty coverage because someone else did routine maintenance or repairs. Two exceptions apply: if the warranty provides the work or parts free, the maker can require its chosen shops or parts, and coverage can be denied for damage a faulty outside repair or part caused. Keep receipts to show the work was done.

Does California's new 3-day return apply to new cars?

No. Under the CARS Act, the 3-day right to cancel covers used vehicles priced at $50,000 or less, and it excludes motorcycles, vehicles with a gross vehicle weight rating of 10,000 pounds or more, auction sales, fleet or commercial sales, and a lessee buying the leased car it already has. It replaces the older 2-day contract cancellation option for used cars. New-car buyers still get the add-on disclosure and price rules.

Where can I report a dealer that said an add-on was required?

You can report it to the FTC at ReportFraud.ftc.gov and to your state attorney general's consumer protection office. Keep copies of the buyer's order, the financing contract and any written add-on offer, since the paperwork is what shows the gap between what you were told and what you were charged.

Before you sign: a checklist

Ask for the price with no add-ons, in writing, and compare it with the price on the final contract.
For each add-on, ask: "Is this required to buy the car or get this loan?" If the lender says yes, check that its cost is included in the disclosed finance charge.
Read the manufacturer's warranty for registration deadlines, maintenance and connection conditions, and any named paid service.
If you buy a service contract, note the last day for a full refund (in California, 60 days for a car with a manufacturer's warranty; 30 for appliances, electronics and used cars without one).
Before financing an add-on, multiply the added payment by the number of months.

This article is general information, not legal advice. Rules vary by state; for a dispute over a specific contract, a consumer attorney can tell you how your state's law applies.