DMV Sales Contracts and Disclosures 3 — Questions and Answers
Question 1: When a vehicle is sold with a full warranty, which section of the Buyers Guide must the dealer complete?
- The 'As Is – No Dealer Warranty' section
- The 'Implied Warranties Only' section
- The 'Full Warranty' section listing covered systems (Correct answer)
- The 'Service Contract' section
Correct answer: The 'Full Warranty' section listing covered systems
The Buyers Guide has a specific section for full warranty coverage that must be checked and completed with covered systems and duration.
Question 2: A dealer agrees to a sale contingent on the customer obtaining financing. If the customer is later denied, the dealer must typically:
- Proceed with the sale and offer in-house financing
- Return the down payment and cancel the contract (Correct answer)
- Keep the deposit as a cancellation fee
- Transfer the vehicle title immediately
Correct answer: Return the down payment and cancel the contract
A financing contingency clause allows cancellation without penalty if the buyer cannot secure approved financing, and the dealer must refund the deposit.
Question 3: What is 'yo-yo financing' in the context of vehicle sales?
- A loan with fluctuating interest rates
- When a dealer calls the buyer back to re-sign at worse terms after the car has been delivered (Correct answer)
- An extended warranty that can be cancelled anytime
- A lease structured as a purchase agreement
Correct answer: When a dealer calls the buyer back to re-sign at worse terms after the car has been delivered
Yo-yo financing occurs when a dealer allows a customer to drive off, then calls them back claiming financing fell through and demands worse loan terms.
Question 4: Under Regulation M, what must be disclosed in a vehicle lease agreement?
- Only the monthly payment amount
- Gross capitalized cost, residual value, money factor, and total of payments (Correct answer)
- The dealer's invoice price
- The manufacturer's suggested retail price only
Correct answer: Gross capitalized cost, residual value, money factor, and total of payments
Regulation M (Consumer Leasing Act) requires disclosure of all key lease terms including capitalized cost, residual value, money factor, and total payment obligations.
Question 5: A salesperson tells a buyer the vehicle has never been in an accident, but a prior collision appears in the vehicle history. The buyer relies on this and purchases. This is an example of:
- Puffery
- Fraudulent misrepresentation (Correct answer)
- A permissible sales estimate
- Dealer discretion
Correct answer: Fraudulent misrepresentation
Stating a false material fact (no prior accident) that induces a buyer to purchase constitutes fraudulent misrepresentation.
Question 6: A customer wants to add an aftermarket alarm system to the contract. The dealer charges for it but fails to install it. This most likely violates:
- The Clean Air Act
- FTC Act Section 5 (unfair or deceptive acts) (Correct answer)
- NADA dealer standards only
- The Vehicle Safety Act
Correct answer: FTC Act Section 5 (unfair or deceptive acts)
Charging for a product or service not delivered is a deceptive trade practice under FTC Act Section 5.
Question 7: Which federal law requires dealers to provide a written odometer disclosure statement at the time of sale for most vehicles?
- Truth in Lending Act
- Federal Odometer Act (Motor Vehicle Information and Cost Savings Act) (Correct answer)
- Magnuson-Moss Warranty Act
- Uniform Commercial Code Article 9
Correct answer: Federal Odometer Act (Motor Vehicle Information and Cost Savings Act)
The Federal Odometer Act requires dealers to provide a written odometer disclosure statement signed by both seller and buyer at vehicle transfer.
DMV Sales Contracts and Disclosures 3
When a vehicle is sold with a full warranty, which section of the Buyers Guide must the dealer complete?