New laws for 2023: Vehicle & Dealership
Contributors
Christian Scali
Eric P. Weiss
Jasmin B. Bhandari
The primary changes this year address and limit the availability of GAP waivers- for service members, and limiting the cost of GAP as well as the loan-to-value ratio for applicable vehicles. The legislature also passed a number of bills that continue to move the state towards a zero-carbon transportation sector, including requiring 35% of new car sales to be ZEVs (zero-emission) by 2026, which may not be a feasible goal. Dealers will need to keep an eye on these issues moving forward as it will affect inventory and demand.
AB 2311—Motor vehicle conditional sales contracts
What the law currently requires
Existing law governs motor vehicle conditional sale contracts, as defined, and requires sellers of motor vehicles to make certain disclosures to buyers. A willful violation of these provisions is a crime.
How this bill changes the law
The bill establishes provisions to govern the offer, sale, provision, or administration, in connection with a conditional sale contract, of a guaranteed asset protection waiver (GAP waiver). Specifically, the bill requires creditors to automatically refund the unearned portion of a GAP waiver if a consumer pays off or otherwise terminates their auto loan early. The bill prohibits: (i) conditioning the extension of credit, the term of credit, or the terms of a conditional sale contract upon the purchase of a GAP waiver; and (ii) the sale of a GAP waiver pursuant to certain provisions where the loan-to-value ratio exceeds the maximum loan-to-value ratio of the GAP waiver. The bill, among other things, authorizes the buyer to recover three times the amount of any GAP charges paid.
The bill bans GAP sales on California car loans of less than 70 percent of a vehicle's value and it caps the price of GAP at 4 percent of the amount the borrower finances. For example, if a customer finances $40,000, the maximum charge for GAP would be $1,600 (4% of $40,000). Also, if a customer puts more than 30% down, GAP cannot be sold (as the loan-to-value ratio would be less than 70%).
The bill is effective January 1, 2023.
Action Items
Your sales department and finance department representatives should be well-versed in this law to avoid adverse consequences. Reach out to counsel for training and applicable policies.
SB 1107—Vehicles
What the law currently requires
Existing law requires an owner or operator of a motor vehicle, or an owner of a vehicle used to transport passengers for hire not regulated by the Public Utilities Commission, to maintain liability insurance coverage for the named insured and any other person using the vehicle with permission in the amount of $15,000 for the bodily injury or death of any one person, $30,000 for the bodily injury or death of all persons, and $5,000 for damage to the property of others resulting from any one accident. Existing law defines “proof of financial responsibility” for purposes of the provisions requiring an owner or operator of a motor vehicle to maintain proof of financial responsibility in these amounts, as specified, or to deposit $35,000 with the Department of Motor Vehicles. Under existing law, a violation of the Vehicle Code is a crime.
How this bill changes the law
This bill would, commencing on January 1, 2025, increase the amount of liability insurance coverage an owner or operator of a motor vehicle, and an owner of a vehicle used to transport passengers for hire not regulated by the Public Utilities Commission, is required to maintain to $30,000 for bodily injury or death of one person, $60,000 for bodily injury or death of all persons, and $15,000 for damage to the property of others as a result of any one accident.
Action Items
All motor vehicle owners are required to comply with the new minimal coverages. Finance department representatives need to be aware of the new coverages as they must be reflected in any binders.
AB 2737—Air pollution
What the law currently requires
Existing law establishes various incentive programs that are administered or funded by the State Air Resources Board to provide financial assistance for the purchase of vehicles by individuals and fleet purchasers. Existing law establishes baseline standards, job quality standards, and a structure for eligibility to participate in incentive programs for the purchase of new drayage or short-haul trucks and applies these standards to fleet purchasers of new vehicles for drayage and short-haul trucking services within the state.
How this bill changes the law
This bill would exclude a rental or leasing entity, as defined, from the definition of a fleet purchaser. The bill would require a lessee of a vehicle that was purchased using that incentive program to comply with the standards applicable to fleet purchasers, as specified. The bill would also require a rental or leasing entity that purchases vehicles for use in fleet operations using an incentive program to notify lessees of these vehicles with lease terms of greater than one year that the lessee is required to comply with the requirements applicable to fleet purchasers. The bill would also make a fleet purchaser and rental or leasing entity subject to specified penalties if the state board determines that the fleet purchaser and rental or leasing entity entered into a rental agreement of less than one year for the express purpose of circumventing these requirements.
Action Items
Your sales department and finance department representatives should be well-versed in this law to avoid adverse consequences, especially in connection with renting or leasing vehicles.
SB 1311—Veterans
What the law currently requires
Existing law authorizes a service member to terminate a lease of a motor vehicle if the service member executes the lease while in a period of military service and then receives military orders for a change of permanent station from a location in the continental United States to a location outside the continental United States, or from a location in a state outside the continental United States to any location outside that state, or to deploy with a military unit, or as an individual in support of a military operation, for a period of not less than 180 days.
How this bill changes the law
This bill would instead authorize the termination of that lease if the service member executes the lease while in a period of military service and then receives military orders for a change of permanent station to a location that is more than 100 miles from the prior duty station, or to deploy with a military unit, or as an individual in support of a military operation, for a period of not less than 90 days.
Action Items
Your sales department and finance department representatives should be well-versed in this law when entering into a lease agreement with an active service member.
SB 1312—Marketplace facilitators
What the law currently requires
The Sales and Use Tax Law requires every person desiring to engage in or conduct business as a seller within this state to file with the department an application for a permit for each place of business and requires every retailer selling tangible personal property for storage, use, or other consumption in this state to register with the department. Under existing law, the Marketplace Facilitator Act, a marketplace facilitator, as defined, is considered the seller, retailer, and dealer for each sale facilitated through its marketplace, as defined, for purposes of determining whether that marketplace facilitator is required to register with the department under the Sales and Use Tax Law or a law that imposes a fee administered pursuant to the Fee Collection Procedures Law. The act relieves the marketplace facilitator of liability for the taxes and fees in specified circumstances.
How this bill changes the law
This bill would create an exception to the definition of "marketplace facilitator" for a vehicle rental broker, as defined, for the facilitation of a specified vehicle rental.
Action Items
Vehicle renter brokers should be well-versed in this law to avoid adverse consequences, including failing to properly register the applicable state agency.
AB 1653—Theft of vehicle parts
What the law currently requires
Existing law, until January 1, 2026, requires the Department of the California Highway Patrol to coordinate with the Department of Justice to convene a regional property crimes task force to identify geographic areas experiencing increased levels of property crimes and assist local law enforcement with resources, such as personnel and equipment.
How this bill changes the law
This bill would specify theft of vehicle parts and accessories as a property crime for consideration by the regional property crimes task force.
Action Items
No recommendations at this time.
SB 1087—Catalytic converters
What the law currently requires
Existing law requires a core recycler that accepts, ships, or sells used catalytic converters to maintain specified information regarding the purchase and sale of the catalytic converters. Existing law prohibits a core recycler from providing payment for a catalytic converter unless the payment is made by check, the check is mailed or provided no earlier than 3 days after the date of sale, unless the seller is a business, and the core recycler obtains a photograph or video of the seller, a written statement regarding the origin of the catalytic converter, and certain other identifying information, as specified. Existing law exempts from this requirement a core recycler that buys used catalytic converters, transmissions, or other parts removed from a vehicle if the core recycler and the seller have a written agreement for the transaction. Existing law requires a core recycler to provide this information for inspection by local law enforcement upon demand. A violation of these provisions is punishable as a misdemeanor.
How this bill changes the law
The bill would prohibit any person from purchasing a used catalytic converter from anybody other than certain specified sellers, including an automobile dismantler, an automotive repair dealer, or an individual possessing documentation, as specified, that they are the lawful owner of the catalytic converter. A violation of this provision would be an infraction, punishable by a fine, as specified.
The bill would also prohibit a core recycler from purchasing a catalytic converter from anybody other than these specified sellers.
Action Items
If possible, dealers should refrain from selling a used catalytic converter in order to avoid punishment.
AB 1740—Catalytic converters
What the law currently requires
Existing law requires a core recycler, as defined, who accepts a catalytic converter for recycling to maintain a written record of specified information regarding the transaction, including the item type and quantity, amount paid for the catalytic converter, an identification number, if any, and the vehicle identification number, for not less than 2 years. Existing law makes it a crime to violate these requirements.
Existing law prohibits a core recycler from providing payment for a catalytic converter unless specified requirements are met. Under existing law, those requirements do not apply to a core recycler that buys used catalytic converters, transmissions, or other parts removed from a vehicle if the core recycler and the seller have a written agreement for the transaction.
How this bill changes the law
This bill would require a core recycler to include additional information in the written record, including the year, make, and model of the vehicle from which the catalytic converter was removed and a copy of the title of the vehicle from which the catalytic converter was removed.
This bill would also prohibit a core recycler from entering into a transaction to purchase or receive a catalytic converter from a person that is not a commercial enterprise, as defined, or a verifiable owner of the vehicle from which the catalytic converter was removed, as specified, and would make other conforming changes.
This bill would require the written agreement to include a log or other record of all catalytic converters received pursuant to the agreement that describes each catalytic converter with sufficient particularity so that each of those catalytic converters in the core recycler’s inventory can reasonably be matched to its description in the agreement.
Action Items
Proceed with caution if approached by a core recycler to purchase a catalytic converter. A written agreement that complies with the law should be prepared and executed by and between the dealership and the core recycler governing any purchases of catalytic converters.
California Air Resources Board
What the law currently requires
Currently, there is no restriction on selling new gasoline cars in California.
How this regulation changes the law
California Air Resources Board (“CARB”) issued a new regulation that will require that all new cars sold in the state by 2035 be free of greenhouse gas emissions like carbon dioxide. The rule also sets interim targets, requiring that 35 percent of new passenger vehicles sold by 2026 produce zero emissions. That requirement climbs to 68 percent by 2030.
Action Items
No recommendations at this time. Furthermore, this regulation will likely be challenged in court.
AB 2496—Loud exhaust systems
What the law currently requires
Under existing law, drivers who break the law regarding noise pollution from the exhaust systems in their vehicles are not required to fix the illegal modifications that cause excessively loud vehicle noise.
How this bill changes the law
This bill would give drivers three months to prove they fixed their exhaust systems, otherwise their vehicle registration could be suspended.
Action Items
No recommendations at this time since this new law applies to drivers who modify their exhaust systems. However, dealerships should refrain from such modifications that increase noise pollution, and make the necessary repairs if a customer is cited for violation.
Inflation Reduction Act
What the law currently requires
The existing federal EV tax credit offers consumers $2,500 to $7,500 in credit for vehicles with a battery capacity of at least 5 kilowatt-hours, but starts to phase out after the manufacturers’ first 200,000 qualifying electric vehicles have been purchased.
How this bill changes the law
The new law, part of the Inflation Reduction Act, allows consumers to get up to $7,500 no matter how many cars have been sold. The new credit also expands eligibility to used vehicles. Eligible used vehicles qualify for a credit of up to $4,000 under the Act. Also beginning in 2023, MSRP and income caps will take effect. Beginning in 2024, taxpayers can transfer their tax credit to dealers, enabling them to receive the credit as a rebate at the point of sale.
Action Items
Sales and finance department representatives should be well-versed in this new law in order to obtain the tax credits when selling an electric vehicle.