Democratic lawmakers for the state of California have brokered an agreement with car dealers that could yield the nation's toughest consumer protections for car buyers, according to the Los Angeles Times (LAT).

Brought together by assembly speaker Fabian Nuñez, car dealers and consumer advocates have agreed to back legislation designed to protect car buyers from hidden charges and defects and allow used car buyers to get a refund within three days of purchase, the paper said.

"The ultimate test of how good this is is that the dealers with businesses in other states kept saying, 'We don't want this to spread,' " Rosemary Shahan, president of Consumers for Auto Reliability and Safety, told the LA Times - she said the legislation would include protections found in no other state.

The paper said that, according to the speaker's office, the agreement would be added to an existing bill. It would make the three-day refund an option for which car buyers could be charged no more than $US250 at the time of purchase. If they chose to return the car, the dealer could charge them up to an additional $250 — but no more than a total of $500 — to compensate for the cost of processing.

The refund option would be available only on used cars sold for less than $40,000, the LAT added.

The Los Angeles Times said the amended bill also would cap the profit car dealers can charge for putting together purchase loans at no more than 2% or 2.5%, depending on the length of the loan - it would prohibit dealers from selling a car as "certified" if the vehicle has ever had a damaged frame, and the amendments would require car dealers to show consumers their credit rating to prevent dealers from inflating the interest rate they charge on loans.