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CALIFORNIA DEALER LICENSE TEST EXAM
QUESTIONS WITH REVISED CORRECT ANSWERS
“A conditional Sales Contract contains which of the following? a. Must be signed by both buyer and seller b. Terms of financing must be disclosed
C. All of the above - CORRECT ANSWER C. All of the above"
"Which of the following are true regarding the Report of Sale(ROS)? a. Dealer has 5 days to submit the bottom portion Report of Sale (not counting the date of sale) b. If late, dealer must pay $5.00 ASF penalty c. Dealer must display bottom portion of ROS on Customer vehicle before delivery
d. All of the above - CORRECT ANSWER d. All of the above"
"Which of the following are true regarding the Vehicle title and Transfer fees? a. Transfer fees are $15. b. If late, dealer must pay $5 ASF penalty
c. All of the above - CORRECT ANSWER C. All of the above"
"If the Board of Equalization revokes or suspends your Seller's Permit, what is the result? a. Cancellation of Dealer's License b. Automatic Revocation of Seller's Permit
c. Revocation or suspension of the Dealer's License - CORRECT ANSWER a. Cancellation of
Dealer's License" "Every Dealer must notify DMV of the effective day of change of ownership: a. 10 days prior to effective date b. Within 5 days prior to effective date c. Within 15 days
d. Within 20 days - CORRECT ANSWER a. 10 days prior to effective date"
"Every Dealer must notify DMV of the effective day of the change of location: a. Immediately b. Within 5 days c. Within 10 days
d. Within 20 days - CORRECT ANSWER a. Immediately"
"Which of the following are not taxable in a vehicle sales transaction?
a. Finance charges b. Insurance charges c. Smog certificate fee (paid to state)
d. All of the above - CORRECT ANSWER d. All of the above"
"DMV requires Special Plates (dealer plates) be placed where on the vehicle? - CORRECT
ANSWER In the rear, over the existing license plate."
"Auto-brokers must do which of the following: a. Limit deposits to 2.5% of the purchase price, and put all deposits in a separate trust account
b. Use any deposits received to pay the broker - CORRECT ANSWER a. Limit deposits to 2.5%
of the purchase price and put all deposits in a separate trust account" "Which of the following is not required to transfer a vehicle? a. Endorsed Certificate of Ownership b. A report of prior service records for the vehicle since new c. Odometer mileage reading
d. Smog Certificate - CORRECT ANSWER b. A report of prior service records for the vehicle
since new" "Which of the following must sign the Certificate of Ownership? a. The legal owner b. The registered owner c. The transferee
d. All of the above - CORRECT ANSWER The legal owner, the registered owner, and the
transferee."
"Registration fees are due at the time of retail sale where ... - CORRECT ANSWER The
registration will expire within 30 days of the date of sale OR the registration has already expired." "If the registration of a vehicle expires while a vehicle is in the dealer's inventory, is the dealer
responsible for paying late registration penalties? - CORRECT ANSWER No"
"The dealership display area must: a. At least twice the size of the dealership office. b. For the exclusive use of the dealer for display purposes only.
"dealer application package must include a photograph of the business location. - CORRECT
ANSWER True"
"are dealer applicants required to obtain a city or county business license in the area where
your business is located? - CORRECT ANSWER True"
"the licensee is not required to obtain a ficticious name statement from the county where the
business is located? - CORRECT ANSWER False"
"as part of the application process is a copy of the lease or rental agreement required? -
CORRECT ANSWER Yes"
"All retail dealer must provide the dmv with a _________ bond - CORRECT ANSWER c.
"All wholesale dealer must provide the dmv with a _________ bond - CORRECT ANSWER c.
"Original license fee is? - CORRECT ANSWER c. $175"
"Renewal of dealer license and plates are valid for ______ year(s) - CORRECT ANSWER b. 2"
"every dealer shall have posted in a place conspicuous to the public the dealer's regular
business days and hours - CORRECT ANSWER Yes"
"a retail dealer must have an established place of business which has an office and display
area situated on the same property? - CORRECT ANSWER True"
"wholesalers are required to have posted signage not less than two feet by two feet? - CORRECT
ANSWER False"
"Car buyer's bill of rights signed into law july 26, 2005 include (circle all) - CORRECT
ANSWER b. Two day cooling off period
c. Disclosure of credit score e. Optional product and service disclosure"
"Retail buyers of vehicles sold for less than ______ must be offered a two day cooling off option -
CORRECT ANSWER c. $40,000"
"is the two day cooling off period option be a separate document? - CORRECT ANSWER Yes"
"The maximum a dealer can charge a customer for a vehicle with a cash price of $5,000 or less is?
CORRECT ANSWER a. $75"
"The maximum a dealer can charge a customer for a vehicle with a cash price of $5,001 to $10,
is? - CORRECT ANSWER b. $150"
"The maximum a dealer can charge a customer for a vehicle with a cash price of $10,001 to
$30,000 is? - CORRECT ANSWER c. $250"
"The maximum a dealer can charge a customer for a vehicle with a cash price of $30,001 to
$39,999 is? - CORRECT ANSWER d. Up to $400"
"The maximum a dealer can charge a customer for a restocking fee for a vehicle with a cash price of
$5,000? - CORRECT ANSWER a. $175"
"The maximum a dealer can charge a customer for a restocking fee for a vehicle with a cash price of
$5,001 to $10,000? - CORRECT ANSWER b. $350"
"The maximum a dealer can charge a customer for a restocking fee for a vehicle with a cash price of
$10,001 to $39,999? - CORRECT ANSWER c. $500"
"Two day cooling off period signage dimensions should not be less than ______? - CORRECT
ANSWER b. 8" x 10""
"the customers bill of rights do not apply to auto brokers and consignment dealers? - CORRECT
ANSWER False"
"The cap on dealer finance income is limited to? - CORRECT ANSWER b. 2.5% for contracts
upto 60 months and 2.0% for contract over 60 months"
"dealer may use dealers plates for business and pleasure - CORRECT ANSWER True"
"family members may use dealers plates for pleasure - CORRECT ANSWER False"
"is a branch location the principal place of business of the dealer? - CORRECT ANSWER No"
"which of the following is not required to transfer a vehicle: A) endorsed certificate of ownership B) a report of prior service records for the vehicle C) odometer mileage reading
D) smog certificate - CORRECT ANSWER B) a report of prior service records for the vehicle"
"which of the following must sign the certificate of ownership: A) the legal owner B) the registered owner C) the transferee
D) all of the above - CORRECT ANSWER D) all of the above"
"registration fees are due at the time of retail sale where: A) The registration will expire within 30 days of the date of sale B) The registration has already expired C) registration fees are always due at the time of sale
D) both a and b - CORRECT ANSWER D) both a and b"
"if the registration of a vehicle expires while a vehicle is in the dealers inventory is the dealer responsible for paying late registration penalties: A) yes B) sometimes
C) no - CORRECT ANSWER C) no"
"A dealer shall submit a registration application and fees to DMV within how many days of the date of sale: A) 10 B) 20 C) 30
D) 40 - CORRECT ANSWER C) 30"
"failure to renew the dealership license by the expiration date results in: A) cancellation of the license after a 30 day extension period B) late penalties if the license is renewed during the 30 day extension period C) forfeiture of bond
D) both a and b - CORRECT ANSWER D) both a and b"
"all dealers must have a display area except: A) wholesale dealers B) dealers selling electric-powered vehicles C) dealers selling less than 5 vehicles per month
D) both b and c - CORRECT ANSWER A) wholesale dealers"
"A dealers office must have all of the following except: A) A direct entrance into the office from the exterior of the building B) Must not be temporary or transitory C) Must contain the books and records of the business
D) Must be at least 1000 feet from any other auto dealership - CORRECT ANSWER D) must be
at least 1000 feet from any other auto dealership" "which of the following are required for dealerships sign? A) each retail dealership must have a sign not less than 2 feet square that can be read from 50 feet away B) each sign must be posted at three locations at the dealership C) each sign must be lighted and/or viewable at night from a distance of 25 feet
D) both A and B - CORRECT ANSWER A) each retail dealership must have a sign not less than
2 feet square that can be read from 50 feet away" "A dealer must post which of the following every business location? A) each salesperson's license B) the name and residence address of the individual owner of the dealership C) dealer's license
D) both A and C - CORRECT ANSWER D) both A and C"
"automatic cancellation of a dealers license will occur upon the happening of which event? A) Failure to maintain adequate bond B) getting sued C) a buyer complaining to DMV about your relationship activities
D) both A and C - CORRECT ANSWER A) Failure to maintain adequate bond"
"Where can the rules for dealer licensing be found? A) the california penal code B) the california rules of professional conduct C) the public utilities commission
D) the california vehicle code - CORRECT ANSWER D) the california vehicle code"
"A dealer must disclose which of the following? A) publicly owned vehicles B) rental cars C) taxi cabs
D) all of the above - CORRECT ANSWER D) all of the above"
"where can a dealer get an emergency supply of report of sales form?
"How many hours does a dealer have to notify the advertiser, in writing that a vehicle has been
sold or withdrawn? - CORRECT ANSWER -48 Hours"
"When is it proper to reset an odometer? - CORRECT ANSWER -Never"
"Effectively July 1, 2006, dealers who advertise a vehicle as "certified" will be in violations of the
law if the vehicle they are referring to in the ad has the following history: - CORRECT
ANSWER -Salvage
-Frame Damage" "When you are a dealer selling a car to a retail customer, when is it proper for the dealer to allow
the customers to obtain a smog certificate on their own? - CORRECT ANSWER -Never"
"If a dealer is suspected of violating the laws that regulate dealers, which of the following actions
may be taken against the dealer: - CORRECT ANSWER -Administrative hearing
-Possible prosecution by the District Attorney -Civil Action for money damages" "What is the maximum time period a dealer is provided to pay the proceeds of a consignment sale
and make an accounting to a cosignor? (person you sold the car for)? - CORRECT ANSWER -
20 Days"
"What would be an exception to the no cooling off period? - CORRECT ANSWER -In the event
of fraud or where the seller agrees to cancel the sale"
"What is a conditional sales contract? - CORRECT ANSWER -A contract where the sale is
conditioned upon the buyer obtaining financing and where a lien is created"
"Which document is used to account for the total cost and terms of payment? - CORRECT
ANSWER -THE CONDITIONAL SALES CONTRACT"
"When is it proper for a dealer to give a report of sale to another dealer? - CORRECT ANSWER
-NEVER"
"What is the minimum size for a main sign for a retail dealer? - CORRECT ANSWER -
SQUARE FEET"
"Which of the following things must a RETAIL dealer have? - CORRECT ANSWER -Sign with
the dealership name and address -An office for the use of the dealer -Display area for the display of cars"
"If a dealer plans on changing the location of his established place of business, when is he
required to notify the DMV? - CORRECT ANSWER -IMMEDIATELY"
"When is a dealer, who sells a vehicle that has a title branded SALVAGE or LEMON LAW
BUYBACK, required to disclose the status of the title to the retail customer? - CORRECT
ANSWER -BEFORE THE SALE OF THE VEHICLE"
"Which is the main body of law used to regulate dealers? - CORRECT ANSWER -THE
VEHICLE CODE"
"What will happen if a dealer unknowingly buys a stolen car? - CORRECT ANSWER -THE
DEALER WILL HAVE TO RETURN THE CAR TO THE RIGHTFUL OWNER"
"How much is the most that can be charged for a document processing charge? - CORRECT
ANSWER -$65 OR $85 DEPENDING ON THE PROCESS USED TO FILE PAPERWORK"
"Before you can apply for your dealer license, you need to a get a resale permit (seller's permit)
from where? - CORRECT ANSWER -THE STATE BOARD OF EQUALIZATION"
"What is required in an auto dealer's advertisement for a vehicle for sale? - CORRECT
ANSWER -Make and Model
-VIN
-Dealership Name"
"When is it acceptable to keep excess registration fees paid by the customer? - CORRECT
ANSWER -IT IS NEVER ACCEPTABLE TO KEEP EXCESS REGISTRATION FEES"
"Which of the following persons must have a salesperson's license at an auto dealership? -
CORRECT ANSWER -Salespersons
-Sales Managers -Finance Manager"
"A Retail Dealer must maintain a bond in the amount of? - CORRECT ANSWER -$50,000"
"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 profit? -
CORRECT ANSWER -NONE"
a. $ b. $ c. $
d. $50 - CORRECT ANSWER d. $50"
"How many days does used vehicle dealer have to COMPLETE APPLICATION complete application to the department from the date of sale? a. 50 b. 30 c. 60
d. 20 - CORRECT ANSWER b. 30"
"How many days does used vehicle dealer have to CLEAR APPLICATION to the department from the date of sale? a. 20 b. 30 c. 50
d. 60 - CORRECT ANSWER c. 50"
"All deals negotiated in Spanish require the dealer to provide a spanish language contract. a. True
B. False - CORRECT ANSWER a. True"
"In advertising, a dealer must identify his herself by: a. Slogan name or Business License Name b. License number
c. Address - CORRECT ANSWER a. Slogan name or Business License Name"
"When a vehicle is sold prior to the expiration of the ad, the dealer has 48 hours to request (IN WRITING) withdrawal of the vehicle ad or overprint the word "SOLD" over particular vehicle. a. True
b. False - CORRECT ANSWER a. True"
"When Advertising, which of the following does the Dealer not have to disclose? a. Vehicle Identification Number or License number b. Total price c. Statement "not including taxes, doc & smog fees, registration & CA tire fee
d. Color - CORRECT ANSWER d. Color"
"It is unlawful to violate any law prohibiting Bait and Switching Advertising: the practice of advertising a low price with the intent to switch the consumer to a higher priced vehicle. a. True
b. False - CORRECT ANSWER a. True"
"If the mileage exceed the mechanical function of the odometer and goes over 100,000 miles, this means that the odometer cannot register the actual mileage. You must: a. Reset it b. Replace it c. Leave it and sell it with the vehicle "As Is"
d. You must disclose this with the purchaser - CORRECT ANSWER d. You must disclose this
with the purchaser" "Is it illegal to tamper with the odometer, disconnect, reset or rollback, etc. a. True
b. False - CORRECT ANSWER True"
"Prior history disclosure is required in writing that states if a vehicle is which of the following: a. Rental Vehicle b. Taxi cab c. Insurance Salvage vehicle d. Former public vehicle
e. All of the above - CORRECT ANSWER d. All of the above"
"An unwind usually results from the dealer's failure to obtain financing for the customer from a lending institution. a. True
b. False - CORRECT ANSWER A. true"
"If the purchaser overpays the dealer an amount for the licensing or transfer of the title of vehicle other than actual amount due, the dealer may: a. Keep the overpayment as part of down payment
b. Dealer may never keep overpayment and must return it to customer - CORRECT ANSWER
b. Dealer may never keep overpayment and must return it to customer" "The Federal Buyers Guide must be displayed on the side windows of the vehicle so that both sides of the label can be read. It must be signed on the back by the customer. a. True
b. False - CORRECT ANSWER a. True"
"What is it most that a dealer can charge customer for smog fee and smog certificate? a. $ b. $ c. $
d. $50 - CORRECT ANSWER d. $50"
"You have passed the inspection and are ready to sell vehicles. Which of the following are true regarding your established place of business? a. The display area must be clearly for the exclusive use of the Dealer for display purposes only even if you have no vehicles on the lot b. The dealer must erect permanent signs at each location that can withstand climatic effects and be readable within 50 feet. c. The sign must have an area of not less than 2 square feet per side displayed and contain lettering not less than 6 inches in size.
d. All of the above - CORRECT ANSWER d. All of the above"
"How many days does the dealer to report to the DMV the employment or termination of an employee? a. 10 days b. 5 days c. 15 days
d. 20 days - CORRECT ANSWER a. 10 days"
"On a consignment, how many days after the date of sale does the dealer have to make account of all transactions and pay the agreed amount to consignor? a. 5 days b. 10 days c. 15 days
d. 20 days - CORRECT ANSWER d. 20 days"
The National Motor Vehicle Title Information System requires which of the following? a. All warranty agreements be sent to DMV b. All vehicles have a Car Fax c. A red warning decal be placed on vehicles with branded titles
d. Both A and B - CORRECT ANSWER c. A red warning decal be placed on vehicles with
branded titles" "When a dealer sells a vehicle that was consigned to them to sell, they must: a. Provide the seller an accounting and payment within 20 days of the sale b. Test drive it before agreeing to sell it c. Provide a warranty
d. None of the above - CORRECT ANSWER a. Provide the seller an accounting and payment
within 29 days of the sale." "Which of the following are permitted methods for computing interest rate?
a. The Pre-Computed Basis Method b. The Simple Interest Basis Method c. The Friedman Method
d. Both A and B - CORRECT ANSWER d. Both A and B"
"What is the maximum a dealer may charge a customer for a smog test? - CORRECT ANSWER
"What is the basic DMV transfer fee to transfer the title into the buyer's name? - CORRECT
ANSWER $15.00"
"If the buyer defaults on a Conditional Sales Contract, the dealer may, subject to proper notification to the buyer: a. Accelerate the amount do b. Repossess vehicle c. Sell the vehicle
d. All of the above - CORRECT ANSWER d. All of the above"
"Which of the following are taxable in a vehicle sales transaction? a. Document preparation fee b. $50 smog fee paid to seller/dealer c. Both A and B
d. Insurance fees - CORRECT ANSWER c. Both A and B"
"Buy Here Pay Here (self-financing) Dealers must: a. Charge interest rates that are less than 20% above prime rate b. Offer 30 day, or 1,000 mile warranties, and put FMV notices on their vehicles c. Send 50% of all interest charged to DMV
d. Finance all vehicles sold for more than $50,000 - CORRECT ANSWER b. Offer a 30 day, or
1,000 mile warranties, and put FMV notices on their vehicles" "Which of the following is required Safety Equipment item? a. Padded dashboards b. Smog Equipment c. Door locks
d. Reclining seatbacks - CORRECT ANSWER b. Smog Equipment"
"Advertisements must identify the dealer by which of the following?
"When is a branch license required? - CORRECT ANSWER When vehicles are ACTUALLY
SOLD at a permanent location beyond 1000 ft from the dealer's main location." "Special Plates may property be used: a. On a dealer's work or service vehicle routinely used to get parts or to service vehicles b. By employees during the course and scope of their employment
c. By a prospective customer for 30 days - CORRECT ANSWER b. By employees during the
course and cope of their empoyment" "Which of the following is a correct statement concerning the use of special plates? a. Special plates do not require a copy of their registration certificates to be kept with them. b. Special plates may be used for towing or transporting other vehicles in limited circumstances. c. Special plates may be used on a vehicle by a buyer after the buyer has purchased and taken
deliver of a vehicle. - CORRECT ANSWER b."
"A dealer must not: a. Lend a special plate, or dealership license to another person to engage in the purchase or sale of vehicles. b. Employ unlicensed salespersons c. Pay "Bird Dog" fees to any unlicensed person to obtain sales.
d. All of the above - CORRECT ANSWER d."
"Who is required to have a salesperson license? - CORRECT ANSWER All managers"
"When does a vehicle not require a smog inspection? - CORRECT ANSWER The vehicle is sold
at wholesale between dealers."
"What is the maximum a dealer may charge a buyer for smog testing a vehicle? - CORRECT
ANSWER $50.00"
"Within how many days must a dealer provide DMV the "Used Vehicle Dealer Notice"? -
CORRECT ANSWER 5 days"
"Within how many days must a dealer submit an application for registration or transfer of
registration of a vehicle? - CORRECT ANSWER 30 days"
"To obtain a dealer license, you must obtain a surety bond for what amount? - CORRECT
ANSWER $50,000"
"How long is an occupational license valid for? - CORRECT ANSWER 2 years"
"Failure to renew the dealership license by the expiration date results in: - CORRECT
ANSWER Cancellations of the license after a 30 day extension period AND late penalties if the
license is renewed during the 30 day extension period."
"All dealers must have a display area except: - CORRECT ANSWER Wholesale dealers"
"A dealer's office must have all of the following characteristics EXCEPT: a. A direct entrance into the office from the exterior of the building b. Must not be temporary or transitory c. Must contain the books and records of the business
d. Must be at least 1000 feet from any other auto dealership - CORRECT ANSWER d. Must be
at least 1000 feet from any other auto dealership" "Automatic cancellation of a dealer's license will occur upon the happening of which event? a. Failure to maintain adequate bond. b. Getting sued c. A buyer complaining to DMV about your dealership activities
d. Both A and C - CORRECT ANSWER Failure to maintain adequate bond"
"What must the dealer attach to every used vehicle offered for sale? - CORRECT ANSWER
Federal Trade Commission Buyers Guide"
"Where can the rules for dealer licensing be found? - CORRECT ANSWER The California
Vehicle Code"
"What must a dealer disclose before a sale? - CORRECT ANSWER Publicly owner vehicles
Rental cars Taxi cabs"
"Where can a dealer get an emergency supply of Report of Sale forms? - CORRECT ANSWER
The dealer's DMV INSPECTOR"
"What must a dealer do when selling a Lemon Law Buyback vehicle? - CORRECT ANSWER
Provide the buyer a disclosure statement to be signed by the buyer AND Affix a decal to the left front doorframe inscribing "Lemon Law Buyback""
