Motor Vehicle Division Dealer Operations and Compliance 2 — Questions and Answers
Question 1: A dealer sells a used vehicle without disclosing a prior salvage title. What is the most likely regulatory consequence?
- License suspension or revocation (Correct answer)
- A verbal warning from the DMV
- Mandatory free vehicle exchange for the buyer
- A 30-day temporary operating permit
Correct answer: License suspension or revocation
Failing to disclose a salvage title is material fraud, which can result in license suspension or revocation by the MVD.
Question 2: Under federal Buyers Guide rules (FTC Used Car Rule), where must the Buyers Guide be displayed?
- In the vehicle's side window (Correct answer)
- At the dealer's front desk
- Mailed to the buyer before purchase
- Posted on the dealer's website
Correct answer: In the vehicle's side window
The FTC requires the Buyers Guide to be displayed in a side window of each used vehicle offered for sale.
Question 3: A franchised new-car dealer wants to also sell used vehicles. Which statement is correct?
- Most states require a separate used vehicle dealer endorsement or license (Correct answer)
- No additional license is needed if the dealer has a new-car franchise
- The dealer must operate used sales from a physically separate lot
- Used vehicle sales are prohibited at franchised dealerships
Correct answer: Most states require a separate used vehicle dealer endorsement or license
Many states require dealers to obtain a separate used vehicle dealer license or endorsement even when they hold a new-car franchise.
Question 4: How long must a licensed dealer typically retain odometer disclosure statements under federal law?
- Five years (Correct answer)
- One year
- Thirty days
- The life of the dealership
Correct answer: Five years
Federal law (49 CFR Part 580) requires dealers to retain odometer disclosure statements for five years.
Question 5: A dealer's surety bond is primarily designed to protect whom?
- Consumers and the state from dealer misconduct (Correct answer)
- The dealer against inventory theft
- The lender financing the dealer's floor plan
- The dealer's employees against wage claims
Correct answer: Consumers and the state from dealer misconduct
Surety bonds protect consumers and the state by providing a financial remedy if the dealer engages in fraudulent or unlawful acts.
Question 6: What does 'floor plan financing' refer to in a dealership context?
- A revolving line of credit used to finance vehicle inventory (Correct answer)
- A mortgage on the dealership building
- A payment plan offered to customers
- The layout approval required for a dealer license
Correct answer: A revolving line of credit used to finance vehicle inventory
Floor plan financing is a revolving credit line that dealers use to purchase new and used vehicle inventory from manufacturers or auctions.
Question 7: A dealer advertises '0% APR for 60 months' in large print but omits that it requires a 20% down payment. This likely violates which principle?
- Truth in Lending Act (Regulation Z) disclosure requirements (Correct answer)
- Federal Trade Commission Used Car Rule
- The National Motor Vehicle Title Information System (NMVTIS)
- State lemon law statutes
Correct answer: Truth in Lending Act (Regulation Z) disclosure requirements
Regulation Z requires that triggering terms like APR be accompanied by all material credit terms, including any required down payment.
Motor Vehicle Division Dealer Operations and Compliance 2
A dealer sells a used vehicle without disclosing a prior salvage title.
What is the most likely regulatory consequence?