DMV Bonds and Business Records 3 — Questions and Answers
Question 1: Which of the following transactions would trigger an obligation to file an updated bond with the DMV?
- Selling more than 10 vehicles in a month
- Increasing the dealer license category (e.g., adding wholesale to retail) (Correct answer)
- Hiring a new salesperson
- Opening a second lot in the same county
Correct answer: Increasing the dealer license category (e.g., adding wholesale to retail)
Adding a new license category often requires an updated or additional surety bond to reflect expanded dealer privileges.
Question 2: How must a dealer store records that the DMV requires to be available for inspection?
- Exclusively in a cloud-based system
- At the licensed location or an approved off-site storage with DMV notification (Correct answer)
- In a safe deposit box at the dealer's bank
- Submitted to DMV monthly for central storage
Correct answer: At the licensed location or an approved off-site storage with DMV notification
Records must be kept at the licensed location or at an approved off-site storage facility, and the DMV must be notified of the off-site address.
Question 3: A retail dealer's surety bond amount in California is set at a minimum of what amount (as of recent regulations)?
- $10,000
- $25,000 (Correct answer)
- $50,000
- $100,000
Correct answer: $25,000
California requires retail dealers to carry a surety bond of at least $25,000 to protect consumers.
Question 4: What is the term 'obligee' referring to in the context of a dealer surety bond?
- The dealer who purchases the bond
- The surety company underwriting the bond
- The state or party protected by the bond (Correct answer)
- The lender financing vehicle purchases
Correct answer: The state or party protected by the bond
The obligee is the party (typically the state) in whose favor the bond is written and who can make claims against it.
Question 5: Which of the following is NOT typically required to be included in a dealer's business records file for each vehicle sold?
- Retail buyer's order
- Dealer's personal tax return (Correct answer)
- Copy of the title or title application
- Odometer disclosure statement
Correct answer: Dealer's personal tax return
A dealer's personal tax returns are not part of the vehicle transaction file required by the DMV.
Question 6: If a surety bond claim is paid out to a consumer, what is the dealer's obligation to the surety company afterward?
- None — the bond is designed to absorb the loss permanently
- Reimburse the surety company for the full amount paid (Correct answer)
- Pay a higher bond premium next year
- File a counter-claim with the DMV
Correct answer: Reimburse the surety company for the full amount paid
Unlike insurance, a surety bond requires the principal (dealer) to indemnify the surety for any claims paid on their behalf.
Question 7: Which record helps the DMV verify that a dealer properly collected and remitted sales tax?
- Buyer's order showing purchase price and tax collected (Correct answer)
- Dealer's employment records
- Vehicle smog test results
- Insurance binder for the vehicle
Correct answer: Buyer's order showing purchase price and tax collected
The buyer's order documents the sale price, taxes collected, and fees charged, allowing the DMV and BOE to verify proper tax collection.
DMV Bonds and Business Records 3
Which of the following transactions would trigger an obligation to file an updated bond with the DMV?