DMV - Representative Sales Contracts and Disclosures Questions and Answers — Questions and Answers
Question 1: According to the Rees-Levering Automobile Sales Finance Act, which of the following must be explicitly itemized on the face of a conditional sale contract if it is part of the amount being financed?
- The dealer's profit margin on the vehicle.
- The cost of future scheduled maintenance.
- The amount paid to a public official for license and registration fees. (Correct answer)
- The salesperson's commission.
Correct answer: The amount paid to a public official for license and registration fees.
The Rees-Levering Act requires a clear, written itemization of the amount financed. This includes, but is not limited to, the cost of insurance and amounts paid to public officials for fees like vehicle license, registration, and transfer fees. Dealer profit, future maintenance, and salesperson commission are not required to be itemized in this section of the contract.
Question 2: A dealership sells a 7-year-old used vehicle "as-is" and provides all the necessary sales contract disclosures. However, the federally required Used Car Buyer's Guide was kept in the glove compartment and only shown to the customer after the contract was signed. Which statement is true regarding this situation?
- This is permissible as long as the buyer receives the guide before leaving the lot.
- The "as-is" sale is automatically voided and becomes a full warranty sale.
- The dealer violated federal law by not prominently displaying the Buyer's Guide on the vehicle before the sale. (Correct answer)
- This is only a violation if the vehicle is less than 5 years old.
Correct answer: The dealer violated federal law by not prominently displaying the Buyer's Guide on the vehicle before the sale.
The Federal Trade Commission's (FTC) Used Car Rule mandates that the Buyer's Guide be conspicuously displayed on the vehicle *before* it is offered for sale. Keeping it in the glove compartment does not meet this legal requirement, as it is not in plain view.
Question 3: When a customer trades in a vehicle with negative equity (owing more than it's worth), how must this be handled on the retail installment sale contract in California?
- It should be added to the cash price of the new vehicle without separate disclosure.
- It must be clearly and conspicuously disclosed as a separate line item. (Correct answer)
- The dealer can absorb the cost into the overall financing without itemizing it.
- It is illegal to proceed with a sale if the trade-in has negative equity.
Correct answer: It must be clearly and conspicuously disclosed as a separate line item.
California law requires that any negative equity on a trade-in vehicle be disclosed separately and transparently on the sales contract. It cannot be concealed by adjusting the vehicle's price or the trade-in allowance. This ensures the buyer understands the total amount being financed.
Question 4: A licensed dealer is processing the sale of several vehicles. For which of the following vehicle transfers is an odometer disclosure statement NOT required?
- The sale of a commercial truck with a Gross Vehicle Weight Rating (GVWR) of 18,000 lbs. (Correct answer)
- The sale of an 8-year-old passenger sedan.
- The transfer of a 2-year-old light-duty truck to another dealer.
- The sale of a new vehicle from a dealer to the first retail buyer.
Correct answer: The sale of a commercial truck with a Gross Vehicle Weight Rating (GVWR) of 18,000 lbs.
Federal and state laws exempt certain vehicles from the odometer disclosure requirement upon transfer of ownership. A primary exemption is for vehicles with a Gross Vehicle Weight Rating (GVWR) of more than 16,000 pounds. Most used passenger vehicles and new vehicles being sold for the first time require the disclosure.
Question 5: A customer is purchasing a used vehicle from a licensed California dealer and asks about the optional 2-day contract cancellation agreement. In which of the following scenarios is the dealer prohibited from offering this option?
- The customer is buying a 3-year-old sedan with a purchase price of $25,000.
- The customer is financing the entire purchase through a credit union.
- The customer is purchasing a used sports car with a negotiated price of $45,000. (Correct answer)
- The customer is trading in a vehicle as part of the transaction.
Correct answer: The customer is purchasing a used sports car with a negotiated price of $45,000.
Under the California Car Buyer's Bill of Rights, the optional contract cancellation agreement can only be offered on used vehicles with a purchase price of less than $40,000. Since the sports car's price is $45,000, it is not eligible for the option.
Question 6: When a licensed dealer sells a vehicle on consignment for a private party, which of the following is a specific disclosure requirement to the purchaser?
- The dealer must provide the purchaser with the consignor's home address and phone number.
- The final sale price must be personally approved by the consignor in the buyer's presence.
- The dealer must disclose the exact commission percentage they are earning from the consignor.
- The dealer must disclose in writing to the purchaser that the vehicle is being sold on consignment. (Correct answer)
Correct answer: The dealer must disclose in writing to the purchaser that the vehicle is being sold on consignment.
While a detailed consignment agreement with many terms is required between the dealer and the consignor, a key requirement towards the buyer is the written disclosure that the vehicle is being sold on consignment. This informs the buyer of the nature of the sale.
DMV - Representative Sales Contracts and Disclosures Questions and Answers
According to the Rees-Levering Automobile Sales Finance Act, which of the following must be explicitly itemized on the face of a conditional sale contract if it is part of the amount being financed?