DMV Dealer-Specific Regulations 5 — Questions and Answers
Question 1: A dealer issues a spot delivery (yo-yo sale) and later calls the buyer back saying financing fell through. What is the dealer legally required to do if the buyer cannot obtain alternate financing?
- Charge a restocking fee and re-list the vehicle
- Return the buyer's down payment and trade-in in the same condition (Correct answer)
- Report the buyer to a credit bureau
- Transfer ownership to a co-signer automatically
Correct answer: Return the buyer's down payment and trade-in in the same condition
If a spot delivery unwinds, the dealer must return all consideration provided by the buyer, including the down payment and trade-in vehicle, in substantially the same condition.
Question 2: A salvage vehicle that has been repaired and passes inspection may be retitled in most states as a:
- Clean title vehicle
- Rebuilt or reconstructed title vehicle (Correct answer)
- Lemon law buyback vehicle
- Flood title vehicle
Correct answer: Rebuilt or reconstructed title vehicle
A repaired salvage vehicle typically receives a 'rebuilt' or 'reconstructed' brand on its title, permanently disclosing its salvage history.
Question 3: Under the Americans with Disabilities Act (ADA), a dealer's showroom and facilities must:
- Provide free vehicle modifications for disabled buyers
- Be accessible to customers with disabilities (Correct answer)
- Hire a minimum number of disabled employees
- Offer home delivery to all disabled customers
Correct answer: Be accessible to customers with disabilities
The ADA requires that dealer facilities open to the public must be physically accessible to people with disabilities, including parking, entrances, and restrooms.
Question 4: A dealer who operates a service department must comply with environmental regulations regarding the disposal of which waste product?
- Cardboard packaging from parts
- Used motor oil and hazardous fluids (Correct answer)
- Promotional signage materials
- Customer vehicle keys
Correct answer: Used motor oil and hazardous fluids
Used motor oil, antifreeze, brake fluid, and other automotive fluids are regulated hazardous waste that must be disposed of through approved channels under EPA rules.
Question 5: When a dealer processes a title transfer for a vehicle with an existing lien, what must occur before the new title can be issued to the buyer?
- The buyer must sign a lien assumption agreement
- The existing lien must be satisfied and a lien release obtained (Correct answer)
- The DMV must contact the previous lienholder directly
- The vehicle must be re-appraised by the lender
Correct answer: The existing lien must be satisfied and a lien release obtained
An existing lien must be paid off and a lien release document obtained before a clear title can be issued to the new buyer.
Question 6: A dealer who sells a vehicle subject to a manufacturer recall without notifying the buyer could face liability under which principle?
- Res ipsa loquitur
- Failure to disclose a known material defect (Correct answer)
- Implied warranty of merchantability only
- Strict product liability of the manufacturer exclusively
Correct answer: Failure to disclose a known material defect
Selling a vehicle with a known open recall without disclosure can constitute failure to disclose a material defect, exposing the dealer to liability.
Question 7: A dealer must prominently post which document in a visible location within the dealership to comply with most state licensing requirements?
- The dealer's tax identification number certificate
- The dealer's motor vehicle dealer license (Correct answer)
- The dealer's insurance policy declarations page
- The dealer's floor plan lender agreement
Correct answer: The dealer's motor vehicle dealer license
Most states require that the dealer's license be prominently displayed in a visible location at the licensed business address.
DMV Dealer-Specific Regulations 5
A dealer issues a spot delivery (yo-yo sale) and later calls the buyer back saying financing fell through.
What is the dealer legally required to do if the buyer cannot obtain alternate financing?