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CALIFORNIA DEALER LICENSE EXAM
QUESTIONS WITH 100% CORRECT ANSWERS
“A dealer's license and special plates shall be automatically canceled if: - CORRECT ANSWER
The dealer abandons the established place of business, The dealer fails to maintain an adequate bond, and The CDTFA resale permit is suspended"
"A dealer must affix to all vehicles offered for sale: - CORRECT ANSWER A federal trade
commission buyers guide" "All the agreements of the buyer and seller with respect to the total cost and terms of payment
must be contained in a single document. That document is: - CORRECT ANSWER The
conditional sales contract" "Which legal actions may be taken against a dealer if they violate the laws, rules and regulations
related to their licensed activity? - CORRECT ANSWER Administrative action, Criminal
action, and Civil action"
"Within 20 days after the sale of a consigned vehicle the dealer must notify the consigner of: -
CORRECT ANSWER The date of sale, The amount of any lien payable to the lienholder, and
The total sales price" "A California law does not provide an included "cooling off "period or other cancellation period
for vehicle sales. The only exception is: - CORRECT ANSWER For legal cause such as fraud or
with the agreement of the seller" "As the selling dealer, you may allow the customer to take the vehicle to get their own smog
certificate: - CORRECT ANSWER You may never allow the customer to take the vehicle to get
their own smog certificate" "Of the following used vehicle sale prices, which would a dealer not be required to offer a contract
cancellation option agreement? - CORRECT ANSWER $52,995"
"What is the maximum markup that dealers may add to a loan for their ówn profit? - CORRECT
ANSWER 2.5% on loans 60 or fewer months, 2% on loans 60 months or more"
"Effective July 1, 2006, dealers who advertise a vehicle as "certified" will be in violation of the law
if the vehicle they are referring to in the ad has the following history: - CORRECT ANSWER
Salvage and Frame damage"
"Which documents are used to disclose the total cost and terms of payment? - CORRECT
ANSWER The conditional sales contract"
"Before you can apply for your dealer license, you need to get a resale permit (seller's permit)
from where? - CORRECT ANSWER The CDFTA"
"What is required in every dealer's advertisement for a vehicle for sale? - CORRECT ANSWER
Make and model, Last 6 of the VIN, Dealership name"
"What is the purpose of Division 12 of the Vehicle Code? - CORRECT ANSWER Regulates the
manner in which vehicles are equipped for safe operation"
"How many cars can a private individual legally sell per year with the intent to make a profit? -
CORRECT ANSWER None"
"California dealer advertising laws apply to which, of the following media types: - CORRECT
ANSWER All forms of media"
"What must a dealer do when selling vehicles at temporary location? - CORRECT ANSWER
Apply for a "Temporary Branch Location""
"How much notice is required when applying for a temporary branch location? - CORRECT
ANSWER 30 Days"
"After return of the vehicle under the cancellation option rules, how soon must the dealer make
refund to the customer? - CORRECT ANSWER Within 48 Hours"
"Which person can use inventory vehicle with the dealer plate 24/7 for personal use? -
CORRECT ANSWER Dealer Owner"
"What is the proper location to place the dealer plate while on a test drive? - CORRECT
ANSWER In place of rear license plate"
"Which of the following statements is correct regarding dealer plates? - CORRECT ANSWER
Dealer plates may be used for any purpose by the dealer"
"When a dealership is going to be sold how far in advance must the DMV receive written notice?
CORRECT ANSWER 10 days"
"How much is auto broker endorsement fee? How much for renewal? - CORRECT ANSWER
$150 first year, $100 renewal" "When a corporation is going to make a change how far in advance must the DMV receive written
notice? - CORRECT ANSWER 30 days"
"What is the corporate change fee? - CORRECT ANSWER $70"
"What is the initial auto broker fee? - CORRECT ANSWER $150"
"What is the renewal auto broker fee? - CORRECT ANSWER $100"
"Once a consignment vehicle is sold how many days does the dealer have to make an accounting
& payment? - CORRECT ANSWER 20 days"
"What is the maximum a dealer can charge for document preparation? - CORRECT ANSWER
"What is the maximum a dealer can charge for smog inspection, which is taxable? - CORRECT
ANSWER $50"
"What is the maximum a dealer can charge for a smog certificate, which is not taxable? -
CORRECT ANSWER $8.25"
"What is the fee a dealer must charge for a retail transfer? - CORRECT ANSWER $15"
"How many days of registration must remain on the date of sale to avoid collecting new fees from
the customer? - CORRECT ANSWER 60 days"
"What is the basic sales tax rate? - CORRECT ANSWER 8.25%"
"How many days does a dealer have to get the notice to DMV, not counting the date of sale? -
CORRECT ANSWER 5 days"
"How many days does a dealer have to get the fees to DMV, not counting the date of sale? -
CORRECT ANSWER 20 days"
"How many days does a dealer have to get the documents to DMV, not counting the date of sale?
CORRECT ANSWER 30 days"
"Which item is required in your sales office? - CORRECT ANSWER Locked Cabinet"
"Who must post a valid resale permit from the board of equalization? - CORRECT ANSWER
Every Dealer"
"Which of the following must be displayed in a retail location? - CORRECT ANSWER Dealer
license, Inspection of vehicle notice, and No cooling off/ cancellation option notices"
"Where are you to hold the blank report of sale forms? - CORRECT ANSWER Locked Cabinet"
"What must the dealer post when a salesperson is hired? - CORRECT ANSWER Sales Person
License"
"How soon must the dealer notify DMV when a salesperson is hired or fired? - CORRECT
ANSWER Notify DMV within 10 days"
"How much space is required for retail display area? - CORRECT ANSWER 1 for each type of
vehicle"
"How much signage is required for retail license? - CORRECT ANSWER 2 square feet"
"The dealer erected sign must be visible from what distance? - CORRECT ANSWER 50 Feet"
"What is required for a wholesale dealer accepting a consignment? - CORRECT ANSWER
Illegal transaction"
"What is required for a licensed dealer acting as a broker? - CORRECT ANSWER Broker
agreement"
"What is required for a retail dealer accepting a consignment? - CORRECT ANSWER
Consignment agreement"
"When may a dealer engage in off site sales? - CORRECT ANSWER W/ temporary branch
location"
"What does the term ROS stand for? - CORRECT ANSWER Report of Sale"
"What items must the dealer charge sales tax upon? - CORRECT ANSWER Price of
accessories, Price of the vehicle, Document Prep Fee"
"What must the dealer create and have in his office with every sale? - CORRECT ANSWER
Jacket"
"The dealer must hold ROS forms in his office for how long? - CORRECT ANSWER 4 years"
"In what order must the dealer use ROS forms? - CORRECT ANSWER Numerical Order"
"The temporary memo regarding DMV fees due on the retail ROS allows posting within how
many business days to avoid a $ 5 ASF? - CORRECT ANSWER 30 days"
"What of the following ASF penalties carry a $25 fine? - CORRECT ANSWER Title application
& corrections not cleared in 50 days"
"What must the dealer do with the temporary operating permit? - CORRECT ANSWER Place
in any window visible from outside the vehicle"
"What must the dealer do for DMV compliance if he is sells a vehicle for out of state delivery? -
CORRECT ANSWER Secure one way vehicle permit OR preregister vehicle"
"What must the dealer charge for one way trip permkt when selling a car for O/S delivery? -
CORRECT ANSWER $19"
"What is the minimum time allowed for the contract cancellation option? - CORRECT
ANSWER 48 hours"
"Who must be offered the contract cancellation option? - CORRECT ANSWER Every retail
buyer w/ cash price less than 40k" "What is the maximum contract cancellation option fee a dealer may charge for a $ 28,
vehicle? - CORRECT ANSWER $250"
"When may the option fee be waived? - CORRECT ANSWER Anytime at the dealers
discretion"
"What is the minimum allowable miles if the buyer purchases the cancellation option? -
CORRECT ANSWER 250"
"What is the maximum total option and restocking fee allowed? - CORRECT ANSWER $500"
"What is the definition of a full refund? - CORRECT ANSWER total price minus option and
restocking fee"
"Which of the following must be displayed in a retail location? - CORRECT ANSWER Contract
Cancellation Option notice, Inspection of vehicle notice, and No cooling off period notice"
"Under AB 68, when the buyer elects to purchase the cancellation option the dealer must? -
CORRECT ANSWER Perform a written inspection report"
"Under AB 68, when the buyer elects to exercise the return option the dealer must? - CORRECT
ANSWER Perform a written inspection report"
"The new law, AB 68 increases the penalties for failure to disclose to? - CORRECT ANSWER
Misdemeanor"
"When must a dealer make a credit score disclosure? - CORRECT ANSWER Whenever the
dealer runs a credit check"
"What is the maximum allowable dealer markup for loan assignment on a 60 month contract? -
CORRECT ANSWER 2.5%"
"What advertising terms under AB 68 have new requirements? - CORRECT ANSWER
certified"
"Under AB 68, when may a flood vehicle be sold as "certified"? - CORRECT ANSWER Never"
"Under AB 68, when may a lemon law buyback car be sold as "certified "? - CORRECT
ANSWER Never"
"Under AB 68, when a dealer advertises a " certified " vehicle the dealer must maintain? -
CORRECT ANSWER A vehicle certification program"
"How many credit score disclosures must be presented? - CORRECT ANSWER One for each
credit agency contacted"
"How many disclosures are required for dealer add-ons? - CORRECT ANSWER One for each
credit agency contacted"
"A contract cancellation display at each sales office and cubicle must have dimensions of
_________? - CORRECT ANSWER 8" x 10""
"If a customer purchases a vehicle for $5,000 and decides to purchase a contract cancellation
option, the dealer may charge the customer up to ________? - CORRECT ANSWER $75"
"If a customer purchases a vehicle for $10,000 and decides to purchase a contract cancellation
option, the dealer may charge the customer up to ________? - CORRECT ANSWER $150"
"If a customer purchases a vehicle for $30,000 and decides to purchase a contract cancellation
option, the dealer may charge the customer up to ________? - CORRECT ANSWER $250"
"If the customers purchases a vehicle price $30,000 - $39,999 and decides to purchase a contract
cancellation option, the dealer may charge the customer up to __________? - CORRECT
ANSWER 1% of the selling price"
"If a customer purchases a vehicle for $40,001 ,how much can the dealer charge for a contract
cancellation option? - CORRECT ANSWER $0"
"What is Reg Z? - CORRECT ANSWER Law that states all terms and costs of financing must be
disclosed to the buyer"
"What must be furnished to the buyer after a sale? - CORRECT ANSWER A Conditional Sales
Contract"
"What is the maximum deposit an auto broker may accept from a customer? - CORRECT
ANSWER 2.5% of the selling price"
"What is consignment? - CORRECT ANSWER An arrangement under which a dealer agrees
to accept possession of a vehicle from an owner on record for the purpose of selling the vehicle"
"If a dealer notices curbstoning, what agency should you file a complaint to? - CORRECT
ANSWER DMV"
"If a customer purchased a vehicle less than $5,000 and a contract cancellation option, and decides to return the vehicle within the time specified, the dealer can charge a maximum
restocking fee of __________? - CORRECT ANSWER $175"
"If a customer purchased a vehicle less than $10,000 and a contract cancellation option, and decides to return the vehicle within the time specified, the dealer can charge a maximum
restocking fee of __________? - CORRECT ANSWER $350"
"If a customer purchased a vehicle costing $10,000 - $39,999 and a contract cancellation option, and decides to return the vehicle within the time specified, the dealer can charge a maximum
restocking fee of __________? - CORRECT ANSWER $500"
"AB 86 states that if a customer purchases a contract cancellation option, the dealer only has to
allow the customer to return the vehicle how many times in a 30 day period? - CORRECT
ANSWER 1 time"
"If a customer purchases a contract cancellation option, and decides to return the vehicle within
the specified time frame, what does the dealer have to return? - CORRECT ANSWER A full
refund"
"Which type of vehicle being sold to customers must be disclosed in writing? - CORRECT
ANSWER Former Taxicab"
"Allowable interest rates for financing for auto finance companies and buy here pay here
dealerships - CORRECT ANSWER Do not apply"
"Simple interest and _______? Interest are the two permissible methods for computing interest for
financing - CORRECT ANSWER Pre computed"
"AB 68 dealer finance income is limited to _______% for contracts of 60 months - CORRECT
ANSWER 2.5%"
"AB 68 dealer finance income is limited to _______% for contracts over 60 months - CORRECT
ANSWER 2.0%"
"What is the maximum a dealer can charge a customer for a document preparation fee? -
CORRECT ANSWER $85"
"Repossession has five basic steps what is the correct order? - CORRECT ANSWER Send
buyer a 15 day notice certified,accelerate balance due, repossess the vehicle, sell the vehicle, sue the buyer for any loss or deficiency"
"Deficiency is? - CORRECT ANSWER The amount the buyer is behind on their payment to the
dealer/financer"
"Dealers must submit application and fees to the DMV ______ days from the date of sale? -
CORRECT ANSWER 30 days"
"ASF Means? - CORRECT ANSWER Administrative service fee"
"Failing to notify the dmv of sale within 5 calendar days of date of sale is a fine of? - CORRECT
ANSWER $5"
"Failing to submit transfer/registration application to dmv within 30 days of date of sale is a fine
of? - CORRECT ANSWER $5"
"When a dealer sells a vehicle for export to another country the selling dealer must mark the
report of sales (reg 51 or reg 396)? - CORRECT ANSWER For export to another country"
"VLF Means? - CORRECT ANSWER Vehicle License Fee"
"The VLF is calculated on the vehicle's? - CORRECT ANSWER Market value"
"What is not permitted to be used on registration paperwork? - CORRECT ANSWER
Highlighter" "A temporary branch location may be operated for a time period not to be exceed how many
days? - CORRECT ANSWER 30 days"
"Bird dog Fees are? - CORRECT ANSWER People that the dealer pays to refer customers to the
dealer"
"Transfer of vehicles _____ model years old or less no longer require smog tests? - CORRECT
ANSWER 4 years"
"Smog Certificates are valid only ________ days for private parties? - CORRECT ANSWER 90"
"Smog certificates issued to a motor vehicle are valid for ______ years? - CORRECT ANSWER 2
years"
"The maximum a dealer may charge the buyer for smoging a vehicle is? - CORRECT ANSWER
"Reg 51 is? - CORRECT ANSWER Report of sales"
"Reg 396 is? - CORRECT ANSWER Wholesale report of sales"
"The lemon law is valid for the first _______ months or _______ miles? - CORRECT ANSWER
"_________ vehicles sold in California will generally come with a manufacturer's extended
warranty? - CORRECT ANSWER New"
"In order to be an auto broker you must be licensed as a? - CORRECT ANSWER Dealer"
"What will happen if you fail to renew your dealer license on time and enter the 30- day grace
period? - CORRECT ANSWER "
"Every retail dealer shall have a sign erected or posted at his place of business. The sign shall have
a total size of not less than: - CORRECT ANSWER Two square feet"
"Each retail dealer is required to maintain a proper display area: - CORRECT ANSWER At all
times"
"Signs on all vehicles indicating the main location address: - CORRECT ANSWER Is not
required at a licensed dealer location"
"A licensed dealer location must have all of the following: - CORRECT ANSWER An office for
the exclusive use of the dealer, A Sign indicating the name and address of the dealer, and A Display area large enough to display the types" "Should the dealer change the site or location of his established place of business, he shall notify
the department: - CORRECT ANSWER Immediately"
"The basic fee for transfer of ownership on a California registered vehicle is: - CORRECT
ANSWER $15"
"Any dealer who sells a vehicle when the title is branded "Lemon law buyback "shall provide a
disclosure statement to the buyer: - CORRECT ANSWER Prior to the sale of the vehicle"
"It is legal to reset the odometer reading on a vehicle: - CORRECT ANSWER It is never legal to
reset the odometer reading"
"A dealer MUST withdraw any advertisement of a vehicle that has been sold within: - CORRECT
ANSWER 48 hours"
"If a dealer is unable to find financing for a customer: - CORRECT ANSWER The down
payment must be returned"
"According to the California code of regulation, which safety items must a dealer comply with? -
CORRECT ANSWER Brakes, Lights, Windshield"
"When a dealer sells a vehicle to a retail buyer he must: - CORRECT ANSWER Pay the full
sales tax due to the CDTFA, Pay all the registration fees and/or penalties due DMV, and Transfer title and/or registration for the buyer" "When a dealer sells a consigned vehiçle, the consignor must be paid the agreed amount within:
CORRECT ANSWER 20 days"
"A dealer may charge a smog inspection and certification fee not to exceed: - CORRECT
ANSWER $50 plus the actual cost of the smog inspection certificate"
"All advertisements made by a dealer must identify the dealer: - CORRECT ANSWER By the
name under which the license does business" "The department, after notice and hearing, may suspend or revoke a license issued, to a dealer for
doing which of the following: - CORRECT ANSWER Knowingly or negligently permitting any
illegal use of dealer plates" "The department, after notice and hearing, may suspend or revoke a license issued, to a dealer for
doing which of the following: - CORRECT ANSWER Knowingly make any false statement or
concealing any material fact in any application for registration" "The department, after notice and hearing, may suspend or revoke a license issued, to a dealer for
doing which of the following: - CORRECT ANSWER Submitting a check, draft, or money
order to the department for fees due which was not honored by the bank" "Prior to entering into negotiations, the selling dealer must notify a purchaser if the vehicle has
been: - CORRECT ANSWER A previous daily rental, A taxicab or publicity owned vehicle,
and/or An insurance salvage or revived salvage vehicle"
"A dealer must post a sign in a conspicuous place in the office that says: - CORRECT ANSWER
The prospective buyer may have a vehicle inspected by a third party"
"Suspension or revocation of the dealer seller's permit by the CDFTA is cause for: - CORRECT
ANSWER Automatic cancellation of the dealer's license"
"If a vehicle has over 100,000 miles on it you must - CORRECT ANSWER Notify the customer
and properly mark the odometer statement form"
"A used vehicle dealer is required to obtain a smog certificate: - CORRECT ANSWER Prior to
offering a vehicle for retail sale"
"Division 12 Safety Requirements may be waived: - CORRECT ANSWER Never"
"After selling a vehicle in California, how many days does a dealer have to submit the report of
sale application copy, supporting documents and fees to the DMV? - CORRECT ANSWER 30
Days"
"What are examples of when a dealer MUST disclose vehicle history in writing? - CORRECT
ANSWER Frame Damage, Salvage Title, Lemon Law Buyback Title, Fire, flood or odometer
discrepancies"
"Which is a DMV policy, but not an actual law? - CORRECT ANSWER Dealer may not use
highlighter pens" "What will happen if you fail to renew your dealer license on time and do not renew within the
30-day grace period? - CORRECT ANSWER Your dealer license will be automatically
cancelled"
"Which one of the following statements is considered unlawful dealer activity? - CORRECT
ANSWER Unlicensed location, Failure to pay Administrative Service fee (ASF) within 30 days,
and Submission of dishonored check to the Department"
"Which of the following part is not considered Division 12 equipment? - CORRECT ANSWER
Engine and Transmission"
"Which of the following part is considered Division 12 equipment? - CORRECT ANSWER
Brakes, Lights, Tires, Horn, Mirrors, Hand brake, Windows, Seat belts, and Air bags"
"Vehicle transfer form REG. 262 is required to be filled when: - CORRECT ANSWER Title is
unavailable at the time of transfer, Appointing power of attorney, and when an error or alteration has been made in odometer section of title."
"Dealer can use the word broker in advertising if: - CORRECT ANSWER Dealer carries broker
license as well as dealer license"
"When must the dealer complete another dealer continuing education class? - CORRECT
ANSWER After One Year, then Every 2 Years"
"Sales or use tax is levied on which of the following items? - CORRECT ANSWER Selling Price,
Smog Inspection Fee, Document Fee"
"What will happen if you don't pay the Administrative Service Fee ( ASF )? - CORRECT
ANSWER DMV will send you a notice, if it has not been paid ASF will charged against your
bond"
"Any Retail Consignment agreement must include the following: - CORRECT ANSWER
Assign responsibility for safety inspection & cost of repairs, Complete vehicle description including odometer reading, Duration of the consignment agreement, any outstanding liens, and current market value" "How many days is the cooling off period allowed under contract cancellation option regulation?
CORRECT ANSWER 2 Dealer posted business days"
"How much time does the DMV have to tell you if they accept or deny your application? -
CORRECT ANSWER 120 Days"
"What is the minimum time allowed for the contract cancellation option? - CORRECT
ANSWER 48 hours"
"Who must be offered the contract cancellation option? - CORRECT ANSWER Every retail
buyer w/ cash price less than 40k" "What is the maximum contract cancellation option fee a dealer may charge for a $28,
vehicle? - CORRECT ANSWER $250"
"When may the option fee be waived? - CORRECT ANSWER Anytime at the dealers
discretion"
"What is the minimum allowable miles if the buyer purchases the cancellation option? -
CORRECT ANSWER 250"
"What is the maximum total option and restocking fee allowed? - CORRECT ANSWER $500"
"What is the definition of a full refund? - CORRECT ANSWER total price minus option and
restocking fee"
"Which of the following must be displayed in a retail location? - CORRECT ANSWER Contract
Cancellation Option notice, Inspection of vehicle notice, No cooling off period notice"
"Under AB 68, when the buyer elects to purchase the cancellation option the dealer must? -
CORRECT ANSWER Perform a written inspection report"
"Under AB 68, when the buyer elects to exercise the return option the dealer must? - CORRECT
ANSWER Perform a written inspection report"
"The new law, AB 68 increases the penalties for failure to disclose to? - CORRECT ANSWER
Misdemeanor"
"When must a dealer make a credit score disclosure? - CORRECT ANSWER Whenever the
dealer runs a credit check"
"What is the maximum allowable dealer markup for loan assignment on a 60 month contract? -
CORRECT ANSWER 2.5 %"
"What advertising terms under AB 68 have new requirements? - CORRECT ANSWER
certified"
"Under AB 68, when may a flood vehicle me sold as " certified"? - CORRECT ANSWER Never"
"Under AB 68, when may a lemon law buyback car be sold as "certified"? - CORRECT
ANSWER Never"
"Under AB 68, when a dealer advertises a" certified " vehicle the dealer must maintain? -
CORRECT ANSWER A vehicle certification program"
"How many credit score disclosures must be presented? - CORRECT ANSWER One for each
credit agency contacted"
"How many disclosures are required for dealer add-ons? - CORRECT ANSWER One for each
item, with a total for all add-ons"
"Under AB 68, when a dealer Return the trade-in rejects an optioned return the dealer must? -
CORRECT ANSWER Issue a written explanation for rejection"
"How many days does a dealer have to return corrections to DMV, not counting the date of sale?
CORRECT ANSWER 50 days"
