The dealer must disclose material damage to a buyer. This is any damage a buyer might want to know in making their decision to purchase the vehicle. Failure to disclose may result in a sale being unwound (give the money back) and punitive damages.
This information shall be disclosed on a statement of facts form. At this time there is no section which requires this disclosure, yet section 9900 CVC requires it in new car and demo transactions.
Some dealers perform a Carfax type report on each vehicle to avoid unpleasant surprises.