DMV Sales Contracts and Disclosures 2 — Questions and Answers
Question 1: A buyer signs a purchase agreement but the dealer has not yet signed. At this point, the contract is:
- Fully binding on both parties
- Binding only on the buyer (Correct answer)
- Void and unenforceable
- Voidable at the dealer's discretion only if a defect is found
Correct answer: Binding only on the buyer
A signed offer by the buyer creates an obligation on the buyer's side, but the contract is not fully binding until the dealer also signs.
Question 2: Under the FTC Used Car Rule, dealers must display a Buyers Guide on used vehicles. Where must this guide be placed?
- Inside the glove compartment
- On the vehicle's side window (Correct answer)
- Attached to the steering wheel
- Posted at the dealership entrance
Correct answer: On the vehicle's side window
The FTC Buyers Guide must be displayed on the side window of the used vehicle so it is visible from outside.
Question 3: A dealer sells a vehicle 'as-is.' Two days later the engine fails. The buyer demands repair under an implied warranty. The dealer's correct response is:
- Repair the engine at no cost
- Offer a partial refund
- Decline, because the as-is disclosure eliminates implied warranties (Correct answer)
- Replace the vehicle
Correct answer: Decline, because the as-is disclosure eliminates implied warranties
A proper as-is disclosure, when required by law to appear on the Buyers Guide, eliminates the dealer's implied warranty obligations.
Question 4: Which document itemizes all fees, taxes, and the final amount financed in a vehicle sale?
- Credit application
- Retail installment sales contract (Correct answer)
- Buyers Guide
- Title certificate
Correct answer: Retail installment sales contract
The retail installment sales contract (RISC) details the purchase price, fees, taxes, trade-in value, and total amount financed.
Question 5: A customer asks a salesperson whether the vehicle was previously used as a rental. The salesperson does not know but says 'No.' This could constitute:
- An acceptable sales tactic
- Material misrepresentation (Correct answer)
- A minor disclosure error with no consequence
- Dealer puffery protected by law
Correct answer: Material misrepresentation
Making a false statement about a material fact—even without knowing it is false—can constitute misrepresentation under consumer protection laws.
Question 6: A dealership adds a $500 'dealer prep fee' not mentioned during negotiation. This fee must be:
- Disclosed verbally before the customer signs
- Listed separately on the purchase contract (Correct answer)
- Hidden in the APR calculation
- Absorbed by the dealer by law
Correct answer: Listed separately on the purchase contract
All fees must be itemized separately on the purchase contract; undisclosed fees added at signing may violate consumer protection rules.
Question 7: A vehicle's odometer reads 42,000 miles but the title brand says 'Exceeds Mechanical Limits.' The dealer must:
- Sell the car only as-is with no further disclosure
- Disclose the brand and its meaning to the buyer in writing (Correct answer)
- Replace the odometer before listing the vehicle
- Report the vehicle to the DMV and refuse the sale
Correct answer: Disclose the brand and its meaning to the buyer in writing
Federal odometer law requires written disclosure when an odometer reading cannot be relied upon due to a mechanical limits brand.
DMV Sales Contracts and Disclosures 2
A buyer signs a purchase agreement but the dealer has not yet signed.
At this point, the contract is: