DMV Advertising and Sales Practices 2 — Questions and Answers
Question 1: A dealer advertises a vehicle at a specific price but refuses to sell it at that price when a customer arrives. This practice is known as:
- Comparative advertising
- Bait and switch (Correct answer)
- Loss leader pricing
- Dealer markup disclosure
Correct answer: Bait and switch
Bait and switch involves advertising a product at an attractive price to lure customers, then refusing to sell at that price or pushing them toward a more expensive item.
Question 2: Which federal agency has primary authority over deceptive automotive advertising practices?
- Department of Transportation (DOT)
- Federal Trade Commission (FTC) (Correct answer)
- National Highway Traffic Safety Administration (NHTSA)
- Consumer Financial Protection Bureau (CFPB)
Correct answer: Federal Trade Commission (FTC)
The FTC has primary authority to regulate deceptive advertising and unfair business practices, including those in the automotive industry.
Question 3: When advertising a monthly payment on a vehicle, a dealer MUST also disclose:
- The vehicle's trade-in value
- The total number of payments and total amount financed (Correct answer)
- The dealer's profit margin
- The vehicle's invoice price
Correct answer: The total number of payments and total amount financed
Truth in Lending Act (TILA) requires that when a payment amount is advertised, the total number of payments and total financed amount must also be clearly disclosed.
Question 4: A dealership's internet ad for a vehicle fails to include the dealer's license number as required by state law. This advertisement is:
- Acceptable if the phone number is listed
- Acceptable if the price is accurate
- A violation regardless of whether the price is accurate (Correct answer)
- Only a violation if a complaint is filed
Correct answer: A violation regardless of whether the price is accurate
Omitting a required dealer license number is a regulatory violation independent of whether other ad content is accurate.
Question 5: A dealer promotes a vehicle as having a 'manufacturer's warranty' when only a limited dealer warranty applies. This is an example of:
- Puffery
- Material misrepresentation (Correct answer)
- Permissible comparative advertising
- A standard disclosure practice
Correct answer: Material misrepresentation
Falsely claiming a manufacturer's warranty when only a limited dealer warranty exists is material misrepresentation because it affects a consumer's purchase decision.
Question 6: Under the FTC Used Car Rule, dealers are required to display a Buyers Guide on used vehicles that includes:
- The vehicle's full service history
- Whether the car is sold 'as is' or with a warranty (Correct answer)
- The dealer's financing rates
- A list of prior owners
Correct answer: Whether the car is sold 'as is' or with a warranty
The FTC Buyers Guide must state whether the car is sold 'as is' or with a dealer warranty, and must describe any warranty coverage provided.
Question 7: A dealer advertises '0% financing for 60 months' but only customers with excellent credit qualify. The ad must:
- Require no disclosure since it is a legitimate offer
- Clearly disclose that the offer is subject to credit approval (Correct answer)
- Only disclose this when asked by the customer
- Remove the offer to avoid deception
Correct answer: Clearly disclose that the offer is subject to credit approval
Credit-based financing offers must clearly disclose eligibility requirements so consumers are not misled into believing everyone qualifies.
DMV Advertising and Sales Practices 2
A dealer advertises a vehicle at a specific price but refuses to sell it at that price when a customer arrives.
This practice is known as: