DMV Vehicle Financing and Credit Practices

Question 1

What federal law requires auto dealers to disclose the Annual Percentage Rate (APR) and total finance charge on a retail installment sale contract?

Accepted Answer

The Truth in Lending Act (TILA / Regulation Z)

Answer

The Equal Credit Opportunity Act

Answer

The Fair Credit Reporting Act

Answer

The Consumer Financial Protection Act

Question 2

Under the Truth in Lending Act, the Annual Percentage Rate (APR) must be disclosed to a buyer before they:

Accepted Answer

Become legally obligated on the credit transaction

Answer

Take a test drive

Answer

Receive the vehicle title

Answer

Make the first monthly payment

Question 3

A 'spot delivery' or 'conditional delivery' occurs when a dealer delivers a vehicle to a buyer before:

Accepted Answer

Final financing approval has been obtained from a lender

Answer

The sales tax is paid to the DMV

Answer

The buyer completes a test drive

Answer

The vehicle passes smog inspection

Question 4

When a dealer assigns a retail installment sale contract to a third-party lender and the lender rejects it, who typically bears financial responsibility under a 'with recourse' agreement?

Accepted Answer

The dealer

Answer

The original vehicle manufacturer

Answer

The buyer

Answer

The California DMV

Question 5

What is 'dealer reserve' (also called dealer markup or participation) in auto financing?

Accepted Answer

The difference between the buy rate offered by the lender and the higher rate charged to the customer

Answer

Money the dealer sets aside for warranty repairs

Answer

A fee paid by the dealer to the DMV for each vehicle sold

Answer

The minimum down payment required by the lender

Question 6

Under federal law, how long is a dealer generally required to retain credit application records and retail installment contracts?

Accepted Answer

2 years

Answer

6 months

Answer

1 year

Answer

5 years

Question 7

A retail installment sale contract (RISC) differs from a simple purchase agreement primarily because a RISC:

Accepted Answer

Includes financing terms such as APR, number of payments, and total amount financed

Answer

Is used only for commercial vehicle sales

Answer

Must be signed by the DMV before the sale is complete

Answer

Only applies to new vehicles with manufacturer warranties