DMV Dealer-Specific Regulations 3 — Questions and Answers
Question 1: A franchised new car dealer receives a vehicle from the manufacturer with a defect listed on a technical service bulletin (TSB). What is the dealer's obligation before selling the vehicle?
- Disclose the TSB to the buyer in writing
- Perform the TSB repair before delivery (Correct answer)
- Report the defect to the DMV within 48 hours
- Return the vehicle to the manufacturer immediately
Correct answer: Perform the TSB repair before delivery
Dealers are generally required to perform outstanding TSB repairs and any open recalls before delivering a new vehicle to a customer.
Question 2: Which federal agency regulates the used car Buyers Guide requirement for dealers?
- 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's Used Car Rule mandates the Buyers Guide disclosure on all used vehicles sold by dealers.
Question 3: When a dealer accepts a vehicle as a trade-in, which document must the selling customer sign?
- Bill of Lading
- Odometer Disclosure Statement (Correct answer)
- Salvage Certificate
- Dealer Reassignment Form
Correct answer: Odometer Disclosure Statement
Federal law requires the seller (trade-in customer) to sign an Odometer Disclosure Statement certifying the mileage at the time of transfer.
Question 4: A dealer's surety bond is primarily designed to protect:
- The dealer's inventory from theft
- Consumers and the state from financial harm caused by the dealer (Correct answer)
- The dealer's employees from workplace injuries
- The lender in a dealer floor plan arrangement
Correct answer: Consumers and the state from financial harm caused by the dealer
A surety bond provides financial protection to consumers and the state if the dealer engages in fraud, fails to transfer titles, or otherwise violates dealer regulations.
Question 5: A dealer issues a 30-day temporary operating permit (TOP). After the TOP expires, what must have occurred for the vehicle to be legally driven?
- The dealer must issue a second TOP for another 30 days
- The buyer must have received permanent registration and plates (Correct answer)
- The buyer must file a self-certification with the DMV
- The vehicle must pass a smog inspection
Correct answer: The buyer must have received permanent registration and plates
A TOP is a temporary authority to operate while permanent registration is processed; once it expires, the vehicle must be permanently registered.
Question 6: Under the Truth in Lending Act (TILA), what must a dealer's finance department disclose to a buyer financing a vehicle?
- The dealer's cost for the vehicle
- The annual percentage rate (APR), finance charge, and total payment amount (Correct answer)
- The manufacturer's suggested retail price (MSRP)
- The dealer's profit margin on the loan
Correct answer: The annual percentage rate (APR), finance charge, and total payment amount
TILA requires disclosure of the APR, total finance charge, amount financed, and total of all payments before the buyer signs a credit contract.
Question 7: If a dealer advertises a vehicle at a specific price but charges a higher price at the point of sale, this practice is known as:
- Spot delivery
- Bait and switch advertising (Correct answer)
- Dealer markup
- Conditional sale
Correct answer: Bait and switch advertising
Bait and switch advertising is illegal and occurs when a dealer lures customers with an advertised price they have no intention of honoring.
DMV Dealer-Specific Regulations 3
A franchised new car dealer receives a vehicle from the manufacturer with a defect listed on a technical service bulletin (TSB).
What is the dealer's obligation before selling the vehicle?