Vehicle Financing and Credit Practices 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 Vehicle Financing and Credit Practices flashcards as text
A dealer is prohibited from including a 'yo-yo' clause that allows them to unwind a completed vehicle sale unless:
Answer: The financing was expressly made conditional in writing and disclosed to the buyer at the time of delivery
To lawfully unwind a deal after delivery, the financing contingency must have been clearly disclosed to the buyer in writing at the time of the sale; otherwise the transaction is considered complete.
Under California law, a dealer who offers a vehicle service contract (VSC) to a buyer must disclose that a VSC is:
Answer: Optional and not required as a condition of the sale or financing
California law requires dealers to clearly disclose that vehicle service contracts are optional products and cannot be made a condition of the sale or financing approval.
If a dealer quotes a customer a monthly payment without disclosing the corresponding interest rate, term, or total amount financed, the dealer may be in violation of:
Answer: Truth in Lending Act (TILA) requirements for credit advertising and disclosure
TILA and Regulation Z require that when a payment amount is quoted in an advertisement or disclosure, the APR, term, and amount financed must also be clearly stated.
A buyer who finances a vehicle through a dealer-arranged loan has the right to receive a copy of the executed retail installment sale contract:
Answer: At the time of signing the contract
The buyer must be provided with a completed, signed copy of the retail installment sale contract at the time of signing, not at some later point.
Under the Military Lending Act (MLA), what special protection applies to active-duty service members financing a vehicle?
Answer: The Military Annual Percentage Rate (MAPR) charged to them cannot exceed 36%
The Military Lending Act caps the Military Annual Percentage Rate (MAPR) — which includes fees and add-on products — at 36% for covered active-duty service members and their dependents.
In a deferred down payment arrangement, the dealer agrees to accept part of the down payment after the sale. What risk does this create for the dealer?
Answer: The lender may require the dealer to repurchase the contract if the deferred payment is not disclosed
If a deferred down payment is not properly disclosed to the lender, the dealer may face a chargeback, requiring them to repurchase the contract because the lender's credit decision was based on inaccurate information.
When calculating the 'amount financed' on a retail installment sale contract, which of the following would REDUCE the amount financed?
Answer: Trade-in allowance applied toward the purchase
A trade-in credit reduces the amount the buyer needs to finance because it is applied as a down payment credit against the vehicle's selling price, directly lowering the amount financed.