DMV Bonds and Business Records 5 — Questions and Answers
Question 1: A dealer operates at two separate locations. What is generally required regarding surety bonds for multiple locations?
- One bond covers all locations under the same dealer number (Correct answer)
- Each location must carry a separate bond
- Only the main location requires a bond
- Bonds are not required if locations are in the same county
Correct answer: One bond covers all locations under the same dealer number
In most cases, a single surety bond covers the dealer license number, which applies to all licensed locations under that number.
Question 2: What is the significance of the 'effective date' on a surety bond filed with the DMV?
- It determines when the dealer's license was first issued
- It marks the start of the period during which the bond provides coverage (Correct answer)
- It is the date the bond premium was paid
- It indicates when the bond was printed by the surety company
Correct answer: It marks the start of the period during which the bond provides coverage
The effective date is when bond coverage begins; claims relating to acts before this date are generally not covered.
Question 3: Which of the following must a dealer record and retain related to a trade-in vehicle?
- Only the trade-in value agreed upon
- All records related to acquisition: title, condition disclosure, and how the trade-in was credited (Correct answer)
- Nothing, as trade-ins are the consumer's responsibility
- Only the smog test result for the trade-in
Correct answer: All records related to acquisition: title, condition disclosure, and how the trade-in was credited
Trade-in vehicles are acquired inventory; dealers must retain the title, any condition disclosures, and how credit was applied in the transaction.
Question 4: Under California law, who has the authority to inspect a licensed dealer's business records?
- Only a superior court judge
- DMV investigators and authorized peace officers (Correct answer)
- Only the dealer's surety company
- Any member of the public upon request
Correct answer: DMV investigators and authorized peace officers
DMV investigators and peace officers have statutory authority to inspect dealer records during business hours.
Question 5: A dealer's surety bond is set to expire and the dealer does not renew it. What action will the DMV most likely take?
- Send a courtesy reminder and allow a 60-day grace period
- Immediately suspend or revoke the dealer's license (Correct answer)
- Allow the dealer to continue operating with a warning
- Transfer the bond obligation to the dealer's insurer
Correct answer: Immediately suspend or revoke the dealer's license
Operating without a valid surety bond violates licensing requirements, and the DMV will suspend or revoke the dealer's license.
Question 6: What information must a dealer include in the 'dealer log' or vehicle inventory record?
- Only vehicles sold in the current month
- VIN, acquisition date, source of acquisition, and disposition for every vehicle (Correct answer)
- Only new vehicles received from the manufacturer
- The dealer's daily sales totals
Correct answer: VIN, acquisition date, source of acquisition, and disposition for every vehicle
The dealer's inventory log must track each vehicle's VIN, when and how it was acquired, and what happened to it (sold, wholesaled, etc.).
Question 7: If a buyer's order is altered after the customer signed it, what is the most serious potential consequence for the dealer?
- A minor administrative fine
- License revocation and possible criminal fraud charges (Correct answer)
- Required retraining of sales staff
- A warning letter from the DMV
Correct answer: License revocation and possible criminal fraud charges
Altering a signed buyer's order constitutes document fraud, which can result in license revocation and criminal prosecution.
DMV Bonds and Business Records 5
A dealer operates at two separate locations.
What is generally required regarding surety bonds for multiple locations?