Motor Vehicle Division Dealer Operations and Compliance 4 — Questions and Answers
Question 1: A dealer's license is placed on 'probation' by the MVD. What does this typically mean?
- The dealer may continue operating under strict conditions and monitoring (Correct answer)
- The dealer must immediately close and surrender all plates
- All pending vehicle sales are automatically voided
- The dealer's surety bond is immediately cancelled
Correct answer: The dealer may continue operating under strict conditions and monitoring
Probation allows a dealer to keep operating while subject to heightened oversight, additional reporting, or corrective action requirements.
Question 2: When a dealer takes a vehicle in on trade, what is the dealer's obligation regarding an existing lien on that vehicle?
- The dealer must pay off the lien before transferring a clean title to a new buyer (Correct answer)
- The lien automatically transfers to the new owner upon sale
- The dealer can sell the vehicle as long as the lien is disclosed in the Buyers Guide
- No action is required if the trade-in value exceeds the lien amount
Correct answer: The dealer must pay off the lien before transferring a clean title to a new buyer
A dealer must satisfy any outstanding lien on a trade-in to deliver a clear, marketable title to the subsequent buyer.
Question 3: What is the maximum number of vehicles a private individual may sell per year in most states before being required to obtain a dealer license?
- The threshold varies by state, typically between 2 and 5 vehicles per year (Correct answer)
- Unlimited, because private sales are never regulated
- Exactly 10 vehicles per year nationwide
- 50 vehicles per year under federal law
Correct answer: The threshold varies by state, typically between 2 and 5 vehicles per year
States set their own thresholds for when repeated private sales trigger dealer licensing requirements, commonly 2–5 vehicles annually.
Question 4: A dealer receives a 'chargeback' from a finance company. What does this mean?
- The finance company returns reserve profit to the dealer because the loan paid off early (Correct answer)
- The dealer must repossess the vehicle immediately
- The customer's credit application was fraudulently submitted
- The state is revoking the dealer's finance license
Correct answer: The finance company returns reserve profit to the dealer because the loan paid off early
A chargeback occurs when a lender reclaims the dealer reserve (finance profit) because the customer paid off the loan before a minimum term, typically 90 days.
Question 5: Under the Gramm-Leach-Bliley Act, dealers who arrange financing must provide customers with:
- A privacy notice explaining how the customer's financial information is shared (Correct answer)
- A free credit score report
- A written warranty for the financed vehicle
- An itemized statement of the dealer's profit margin
Correct answer: A privacy notice explaining how the customer's financial information is shared
The GLB Act requires financial institutions, including dealers who arrange credit, to give consumers a privacy notice at the time of the transaction.
Question 6: A dealer advertises a vehicle at a specific price online but charges a higher price in the showroom. This practice is commonly called:
- Bait-and-switch advertising (Correct answer)
- Spot delivery
- Packing
- Yo-yo financing
Correct answer: Bait-and-switch advertising
Bait-and-switch involves advertising a low price to attract customers and then substituting a higher price or different vehicle at the point of sale.
Question 7: A dealer must affix a 'Manufacturer's Suggested Retail Price' (MSRP) sticker to each new vehicle. This requirement comes from which law?
- The Automobile Information Disclosure Act (Monroney Act) (Correct answer)
- The Federal Trade Commission Act
- The Truth in Lending Act
- The Motor Vehicle Safety Act
Correct answer: The Automobile Information Disclosure Act (Monroney Act)
The Monroney Act (Automobile Information Disclosure Act) mandates that new vehicles display the MSRP sticker with pricing and equipment details.
Motor Vehicle Division Dealer Operations and Compliance 4
A dealer's license is placed on 'probation' by the MVD.
What does this typically mean?