Quiz Section 1-4

Must a conditional sales contract for a motor-vehicle sale be in writing?

Yes. California law requires every conditional sales contract to be in writing.

What is the required minimum size of the Contract-Cancellation-Option notice that must be displayed in every sales office or cubicle?

At least 8 inches by 10 inches.

Maximum charge for a Contract-Cancellation Option when the vehicle price is under $5,000

Up to $75.

Maximum charge for a Contract-Cancellation Option when the vehicle price is $5,000–$9,999.99

Up to $150.

Maximum charge for a Contract-Cancellation Option when the vehicle price is $10,000–$29,999.99

Up to $250.

Maximum charge for a Contract-Cancellation Option when the vehicle price is $30,000–$39,999.99

Up to 1 % of the vehicle’s selling price.

Are vehicles priced $40,000 or more eligible for a Contract-Cancellation Option?

No. Sales of $40,000 or more are not eligible, so no fee may be charged.

What does Regulation Z (Reg Z) require in vehicle financing?

It mandates full written disclosure of all credit terms and costs (Truth-in-Lending).

Is a conditional sales contract valid if only the buyer signs it?

No. Both buyer and seller (or their authorized representative) must sign.

Must the buyer receive a copy of the conditional sales contract immediately after the sale?

Yes, copies must be furnished to the buyer.

If the buyer pays 100 % in cash, must the dealer complete a conditional sales contract?

No. A conditional sales contract is required only when credit is extended.

Maximum deposit an auto broker may accept from a customer

No more than $1,000 (or 2.5 % of the vehicle price, whichever is less).

Define “consignment” in vehicle sales.

An arrangement in which a dealer accepts possession of a vehicle from the registered owner solely for the purpose of selling it on the owner’s behalf.

Which agency should receive a complaint when a dealer observes unlicensed “curbing”?

The Department of Motor Vehicles (DMV).

Maximum restocking fee if a vehicle costing less than $5,000 is returned under a Contract-Cancellation Option

$175.

Maximum restocking fee if a vehicle costing less than $10,000 is returned under a Contract-Cancellation Option

$350.

Maximum restocking fee if a vehicle costing $10,000–$39,999 is returned under a Contract-Cancellation Option

$700.

Under AB 68, how many times may a buyer return a vehicle within 30 days after purchasing a Contract-Cancellation Option?

Only one time.

When a buyer returns a vehicle under a valid Contract-Cancellation Option, what must the dealer return?

A full refund of the purchase price and the buyer’s trade-in vehicle (or its value).

Can a dealer be sued for failing to disclose known material damage to a vehicle?

Yes. Failure to disclose material damage can lead to substantial liability.

Must a dealer disclose if a vehicle was formerly a taxi, rental, or law-enforcement vehicle?

Yes. Prior commercial or law-enforcement use must be disclosed.

Are there statutory caps on the interest rate that an auto finance company or buy-here-pay-here dealer may charge in California?

No specific cap applies; general usury limits do not apply to licensed auto finance lenders.

Two permissible methods for computing interest on vehicle finance contracts

Pre-computed interest and simple interest.

Dealer finance income limit (mark-up) on contracts of 60 months or less under AB 68

2.5 %.

Dealer finance income limit (mark-up) on contracts longer than 60 months under AB 68

2.0 %.

Maximum Document Preparation Service fee a California dealer may charge

$55.

If a dealer pulls a customer’s credit score, must it be disclosed with a statutory notice?

Yes.

If a customer cancels the deal before signing the conditional sales contract, must the dealer refund any money paid?

Yes. All payments must be returned.

Correct order of the five basic repossession steps

1) Send a 15-day certified notice; 2) accelerate the balance; 3) repossess the vehicle; 4) sell the vehicle; 5) sue the buyer for any deficiency.

Define “deficiency” in vehicle finance.

The unpaid amount the buyer still owes after the repossessed vehicle is sold and the sale proceeds are applied to the balance.

True or False: Only the legal owner or a licensed repossession company may repossess a vehicle.

True.

True or False: When a deal is negotiated in Spanish, Chinese, Korean, Tagalog, or Vietnamese, the dealer must provide the contract in that language.

True.

 If a dealer carries own contract (buy here pay here) what must be complied with? Circle all correct answers?

Provisions of the vehicle code, Reg Z and Civil code concerning conditional sales contract

The dealer can represent the document preparation fee as a government fee?

False