Sales Contracts and Disclosures Flashcards
7 cards from real DMV practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Sales Contracts and Disclosures flashcards as text
A buyer purchases a used vehicle and later discovers it was previously declared a total loss by an insurer. The dealer did not disclose this. The buyer's strongest legal claim is likely based on:
Answer: Failure to disclose a material fact
Total loss history is a material fact that must be disclosed; failure to do so supports a claim of fraudulent concealment or unfair trade practice.
Under the Truth in Lending Act (TILA), the Annual Percentage Rate (APR) must be disclosed:
Answer: Before the credit contract is signed
TILA requires clear disclosure of the APR and other credit terms before the consumer signs a credit agreement.
A dealer sells a vehicle and the parties agree the purchase price includes a trade-in allowance. If the trade-in value is later adjusted downward without the buyer's consent, this could be:
Answer: A breach of the purchase agreement
Once a trade-in value is agreed upon in a signed contract, unilaterally reducing it without consent constitutes a breach of that agreement.
A 'four-square' worksheet is used by some dealers to negotiate. Regulators view it skeptically because it can:
Answer: Obscure the true cost by manipulating four variables simultaneously
The four-square method can confuse buyers by shifting focus between price, trade-in, down payment, and monthly payment to obscure actual cost.
Which of the following is NOT typically required to appear on a vehicle purchase contract?
Answer: Dealer's profit margin
Dealers are not required to disclose their profit margin on the purchase contract; VIN, selling price, and finance charges are required disclosures.
A customer signs a purchase contract. The dealer then discovers the trade-in vehicle has a lien the customer did not disclose. The dealer's most appropriate action is:
Answer: Notify the buyer and renegotiate or require payoff before completion
An undisclosed lien on a trade-in affects the deal's terms; the dealer should notify the buyer and either renegotiate or require the lien be paid off.
A dealer's finance manager adds a credit insurance product to the contract without telling the customer. Under TILA, this is:
Answer: A violation because it is an undisclosed credit-related charge
TILA requires all credit-related charges to be disclosed; adding undisclosed products inflates the finance charge and violates disclosure requirements.