Motor vehicle financing in California is governed primarily by the Rees-Levering Motor Vehicle Sales Finance Act, found in Civil Code Section 2981 and following sections. This act sets the rules for conditional sales contracts — the contracts that dealers and buyers sign when a vehicle is purchased on credit rather than paid for in full at the time of sale.
Let’s start with the basic terms you need to understand. The “cash price” is the price of the vehicle as if the buyer were paying cash — before any financing charges are added. The “down payment” is the amount the buyer pays upfront, which can include cash, a trade-in vehicle, or both. The “amount financed” is the cash price plus any other charges included in the financing (such as taxes, fees, and optional products) minus the down payment. The “finance charge” is the total cost of credit — essentially, the total interest the buyer will pay over the life of the loan. The “total of payments” is the amount financed plus the finance charge — the total amount the buyer will pay. And the “annual percentage rate” or APR is the cost of credit expressed as a yearly interest rate.
Each of these terms must be clearly disclosed to the buyer in the conditional sales contract. Under Rees-Levering, the contract must itemize these amounts so the buyer can see exactly what they’re paying for the vehicle, how much is being financed, what the interest costs are, and what the total obligation will be. This isn’t just good business practice — it’s the law.
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⚠ Key Compliance Point The Rees-Levering Motor Vehicle Sales Finance Act (Civil Code §2981 et seq.) requires clear disclosure of all financing terms in the conditional sales contract, including cash price, down payment, amount financed, finance charge, total of payments, and APR. These disclosures must be presented in a clear, conspicuous manner. |