DMV Vehicle Financing and Credit Practices 3

Question 1

A dealer is prohibited from including a 'yo-yo' clause that allows them to unwind a completed vehicle sale unless:

Accepted Answer

The financing was expressly made conditional in writing and disclosed to the buyer at the time of delivery

Answer

The buyer fails to maintain required insurance

Answer

The buyer has not made the first monthly payment

Answer

The dealer discovers an undisclosed lien on the trade-in vehicle

Question 2

Under California law, a dealer who offers a vehicle service contract (VSC) to a buyer must disclose that a VSC is:

Accepted Answer

Optional and not required as a condition of the sale or financing

Answer

Mandatory for all financed vehicles

Answer

Included automatically in the vehicle price

Answer

Only available through the vehicle manufacturer

Question 3

If a dealer quotes a customer a monthly payment without disclosing the corresponding interest rate, term, or total amount financed, the dealer may be in violation of:

Accepted Answer

Truth in Lending Act (TILA) requirements for credit advertising and disclosure

Answer

The California Vehicle Code section on odometer disclosure

Answer

The Automotive Repair Act

Answer

The California Air Resources Board regulations

Question 4

A buyer who finances a vehicle through a dealer-arranged loan has the right to receive a copy of the executed retail installment sale contract:

Accepted Answer

At the time of signing the contract

Answer

Only after the lender approves and funds the contract

Answer

Within 10 days of the vehicle delivery

Answer

Only upon written request to the dealer

Question 5

Under the Military Lending Act (MLA), what special protection applies to active-duty service members financing a vehicle?

Accepted Answer

The Military Annual Percentage Rate (MAPR) charged to them cannot exceed 36%

Answer

They are exempt from paying sales tax on vehicle purchases

Answer

They receive a mandatory 30-day right to cancel any vehicle purchase

Answer

Dealers must offer them 0% APR financing

Question 6

In a deferred down payment arrangement, the dealer agrees to accept part of the down payment after the sale. What risk does this create for the dealer?

Accepted Answer

The lender may require the dealer to repurchase the contract if the deferred payment is not disclosed

Answer

The DMV will refuse to transfer the title until the full down payment is received

Answer

The manufacturer may void the dealer's franchise agreement

Answer

California sales tax cannot be collected on deferred amounts

Question 7

When calculating the 'amount financed' on a retail installment sale contract, which of the following would REDUCE the amount financed?

Accepted Answer

Trade-in allowance applied toward the purchase

Answer

Document preparation fee

Answer

DMV registration and transfer fees

Answer

GAP insurance premium added to the contract