DMV Advertising and Sales Practices 5 — Questions and Answers
Question 1: A dealer advertises a vehicle as 'certified pre-owned' when it has not passed the manufacturer's official CPO inspection. This is:
- Acceptable if the dealer performed its own inspection
- A misrepresentation that violates advertising standards (Correct answer)
- Permissible as long as a warranty is offered
- Only prohibited if the manufacturer files a complaint
Correct answer: A misrepresentation that violates advertising standards
Using a manufacturer's CPO designation without meeting the manufacturer's program requirements is a misrepresentation of the vehicle's status and warranty coverage.
Question 2: A dealer requires all customers to purchase add-on products (e.g., paint protection, gap insurance) as a condition of the advertised sale price. This practice may violate:
- NHTSA equipment standards
- The dealer's franchise agreement only
- Consumer protection laws prohibiting tie-in sales and deceptive advertising (Correct answer)
- The Magnuson-Moss Warranty Act
Correct answer: Consumer protection laws prohibiting tie-in sales and deceptive advertising
Requiring consumers to purchase unwanted add-ons as a condition of the advertised price is a form of deceptive pricing that may violate state consumer protection statutes.
Question 3: The annual percentage rate (APR) disclosed in a vehicle financing advertisement must:
- Be calculated by the dealership using its preferred method
- Be expressed as a simple interest rate rather than compound rate
- Be calculated according to the formula prescribed by Regulation Z (Correct answer)
- Only appear in the small print at the bottom of the advertisement
Correct answer: Be calculated according to the formula prescribed by Regulation Z
Regulation Z requires APR to be calculated using a standardized formula so that consumers can accurately compare financing offers across lenders.
Question 4: A dealer's advertisement states 'no credit check required.' The dealer then pulls a consumer's credit report without their knowledge. This action potentially violates:
- Only the advertisement's stated terms
- The Fair Credit Reporting Act (FCRA) and the advertised representation (Correct answer)
- The Gramm-Leach-Bliley Act only
- No law, since credit checks are standard practice
Correct answer: The Fair Credit Reporting Act (FCRA) and the advertised representation
Pulling a credit report without authorization violates FCRA, and the practice also contradicts the dealer's own advertised terms, creating dual legal exposure.
Question 5: When advertising a lease, which disclosure is triggered under the Consumer Leasing Act if a specific payment amount is mentioned?
- Only the vehicle model year must be disclosed
- The total of all lease payments and the residual value must be disclosed (Correct answer)
- A full 16-point disclosure statement must appear in the ad
- No additional disclosures are required for lease advertisements
Correct answer: The total of all lease payments and the residual value must be disclosed
The Consumer Leasing Act (Regulation M) requires that ads citing a specific payment amount also disclose the total of all payments and the residual value at lease end.
Question 6: A dealer's advertisement says 'all vehicles must go — selling at a loss!' In reality, the dealer maintains normal profit margins. This statement is best classified as:
- Legal puffery with no consequences
- A potentially deceptive factual claim if profit margins are normal (Correct answer)
- A protected negotiating statement
- An acceptable sales tactic under FTC guidelines
Correct answer: A potentially deceptive factual claim if profit margins are normal
Claiming to sell 'at a loss' when actually making standard profits is a specific factual claim that could be found deceptive if consumers rely on it.
Question 7: A dealer runs an ad with the headline '0 down, 0 payments for 90 days' but the fine print notes interest accrues from day one. The ad is MOST LIKELY:
- Compliant since the fine print provides the full disclosure
- Deceptive because the headline creates a false impression not cured by buried fine print (Correct answer)
- Acceptable as long as the APR is disclosed elsewhere on the lot
- Legal in all states since deferred payments are a standard financing tool
Correct answer: Deceptive because the headline creates a false impression not cured by buried fine print
When a headline creates the impression of no cost, fine print disclosing accruing interest does not cure the deception — the net impression remains misleading under FTC standards.
DMV Advertising and Sales Practices 5
A dealer advertises a vehicle as 'certified pre-owned' when it has not passed the manufacturer's official CPO inspection.
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