Free Motor Vehicle Division Dealer Operations and Compliance Questions and Answers — Questions and Answers
Question 1: A motor vehicle dealer must maintain records of all vehicle purchases and sales. According to common state regulations, how long must these records, including odometer disclosure statements, be retained?
- One year from the date of sale.
- Three years from the date of the last payment.
- Five years from the date of sale. (Correct answer)
- Indefinitely.
Correct answer: Five years from the date of sale.
Federal law, specifically 49 CFR Part 580, requires dealers to retain copies of all odometer disclosure statements they issue and receive for five years. Many states have adopted this five-year retention period for all sales records to align with federal requirements.
Question 2: A dealership's advertisement for a used car prominently features a low price, but in small print, it states this price is only available to customers who finance with the dealership and trade in a vehicle from the last five model years. Which advertising practice is this dealership likely violating?
- Puffery, which is legally acceptable.
- Bait-and-switch advertising. (Correct answer)
- Standard industry practice for promotions.
- Full and clear disclosure rules.
Correct answer: Bait-and-switch advertising.
This is a form of bait-and-switch advertising. Dealers cannot advertise a price that is not available to the average customer. Using qualifications like "with dealer-arranged financing" or "with trade" that are not available to everyone to advertise a sales price is a prohibited, deceptive practice.
Question 3: What is the primary purpose of a motor vehicle dealer surety bond?
- To insure the dealership's vehicle inventory against theft or damage.
- To pay for the dealership's licensing and registration fees with the state.
- To provide a source of funds for paying dealership employees and vendors.
- To protect consumers from financial loss due to a dealer's fraudulent or unlawful actions. (Correct answer)
Correct answer: To protect consumers from financial loss due to a dealer's fraudulent or unlawful actions.
A motor vehicle dealer bond is a type of surety bond required by the state to ensure the dealer complies with all laws and regulations. Its main purpose is to provide a financial guarantee to compensate customers who suffer financial loss due to the dealer's failure to follow the law, such as not transferring a title correctly or engaging in fraud.
Question 4: A dealer wishes to hold a weekend sales event at a local shopping mall parking lot, away from their licensed business location. Which of the following is typically required for the dealer to legally conduct sales at this event?
- A verbal agreement with the mall management.
- An off-premise sales permit or supplemental license from the MVD. (Correct answer)
- A standard business license is sufficient.
- A notification sent to the local chamber of commerce.
Correct answer: An off-premise sales permit or supplemental license from the MVD.
Most states require a dealer to obtain a specific off-premise permit or a temporary supplemental license to legally sell vehicles at a location other than their established place of business. Simply displaying vehicles may be allowed, but conducting sales activities, like executing contracts, requires this special permit.
Question 5: Under the Federal Truth in Mileage Act (TIMA), when is a written odometer disclosure statement required?
- Only when the vehicle is more than 10 years old.
- Only for vehicles sold for more than $25,000.
- Every time ownership of a motor vehicle is transferred. (Correct answer)
- Only when a vehicle is sold at auction.
Correct answer: Every time ownership of a motor vehicle is transferred.
The Truth in Mileage Act (TIMA) requires the seller of a motor vehicle to provide a written odometer disclosure to the buyer whenever ownership is transferred. This is a crucial step in preventing odometer fraud. While some very old vehicles may become exempt, the general rule applies to nearly all transfers of ownership.
Question 6: Regarding dealership record-keeping, which statement is most accurate about the storage of transaction files?
- All records for the past five years must always be stored at the licensed dealership location.
- Records can be stored in any format, including handwritten notes, as long as they are legible.
- The most recent records (e.g., the current and previous 13 months) must be kept at the dealership, while older records may be stored off-site. (Correct answer)
- Dealers only need to keep the original title and bill of sale; all other documents can be discarded after the sale.
Correct answer: The most recent records (e.g., the current and previous 13 months) must be kept at the dealership, while older records may be stored off-site.
Many state regulations, like those in Texas, require that a dealer's most recent transaction records (often the current and last 13 months) must be physically maintained at the licensed dealership location for easy inspection. Older records, up to the full required retention period (e.g., 48 months or five years), can typically be stored at an off-site location.
Free Motor Vehicle Division Dealer Operations and Compliance Questions and Answers
A motor vehicle dealer must maintain records of all vehicle purchases and sales.
According to common state regulations, how long must these records, including odometer disclosure statements, be retained?