What California Car Dealers Need To Know About The End Of The Clean Air Vehicle (CAV) Decal Program

Background

As early as 1999, single-occupant Clean Air Vehicles (CAV) have been permitted to travel in High Occupancy Vehicle (HOV) lanes (carpool lanes) in California. ¹ With the growing popularity of electric vehicles, the California Department of Motor Vehicles (DMV) began issuing CAV decals to qualifying vehicles on January 1, 2019.² The decals issued by the DMV were valid for four years. (Id.) Single-occupant clean air vehicles could travel in HOV lanes in California without penalty, and pay reduced toll rates in some areas.

The End of the CAV Decal Program

The federal government no longer permits states, including California, to issue CAV decals. ³ While California requested an extension of this program, the federal government failed to authorize the requested extension. (Id.) As of October 1, 2025, vehicles displaying a CAV decal are no longer permitted to travel in HOV lanes with a single occupant or receive reduced toll rates in some areas, even if the decal has not reached the four-year expiration period. (Id.)

This means that even for vehicles that recently received a CAV decal, in order to travel in HOV lanes, vehicles must meet posted vehicle occupancy and pay the required tolls. (Id.) Vehicles that do not meet posted occupancy or pay required tolls may receive a citation. (Id.) California's law enforcement has extended a 60-day grace period such that one-time offenders will not receive a citation until December 1, 2025.⁴ Thereafter, offenders face citations up to $490. (Id.)

The Program's Effect on California Vehicle Dealers

The end of the CAV program may have a negative effect on the sales of clean air vehicles by dealers. Previously, buyers who purchased a clean air vehicle received a federal tax credit as part of the sale.⁵ This federal tax credit is not available for vehicles acquired after September 30, 2025. (Id.) Notably, this federal tax credit incentivized many buyers to purchase clean air vehicles. With this benefit no longer in place, dealers may see a decline in sales of clean air vehicles. Additionally, many buyers were incentivized to purchase clean air vehicles to receive the benefit of traveling in the HOV lane as a single occupant, particularly in Southern California, where traffic is a major concern for drivers.⁶ Dealers must be prepared to explain this major change to prospective buyers of clean air vehicles, as failure to properly advise customers could constitute violations of the Consumers Legal Remedies Act ("CLRA") and other state consumer laws.

Footnotes

1. https://www.dmv.ca.gov/portal/news-and-media/federal-government-ends-clean-air-vehicle-cav-decal-program/

2. Cal. Veh. Code §§ 5205.5 and 21655.9

3. https://www.dmv.ca.gov/portal/news-and-media/federal-government-ends-clean-air-vehicle-cav-decal-program/

4. https://www.forbes.com/sites/michaelharley/2025/10/17/california-bans-evs-from-solo-carpool-lanes-drivers-split-on-impact/

5. https://www.irs.gov/clean-vehicle-tax-credits

6. https://machronicle.com/community-reacts-to-rollback-of-federal-ev-tax-credit/#:~:text=When%20Giambruno%20purchased%20his%20Leaf,in%20the%20past%20few%20months.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.