Practice Test – Dealer 101®

What is the best way to prepare to pass the DMV in-person 40 question exam?

Complete the DMV Dealer Pre-License Education, watch the short videos, review the detailed notes, and use this Practice Test as extra preparation for the DMV exam.

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Skip the DMV Education Program and just take this Practice Test over and over.

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The DMV in-person exam uses different questions than this Practice Test, but it tests the same information.

True – The DMV may select 40 questions from a large pool, so the questions won’t match this Practice Test exactly. The topics and information are the same, so I need to know the information.

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False – The DMV uses the same exact questions as this Practice Test, so memorizing these questions is enough.

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ANY of the following actions could result in a Dealer license suspension:

Misuse of Special (Dealer) Plates
Bait & Switch advertising schemes
Failure to pay Administrative Service Fees when due
Submission of dishonored check to Department
Selling at unlicensed locations
Failure to transfer title
Paying “Bird Dog” fees

True

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False

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Retail Dealers (selling more than 6 vehicles per year) must display Federal Buyer’s Guide in plain view (with both sides visible) and may be either:

Hung from the rear-view mirror or outside side-view mirror
Placed under a windshield wiper
Attached to a side window

True

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False

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State and Federal regulatory agencies have no authority over Dealers. Only the DMV can impose penalties should they fail to abide by the laws and regulations governing Dealers.

True

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False

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Used Car Dealers must have a Surety Bond valued at:

$5,000 for Wholesale Dealers / $25,000 for Retail Dealers

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$10,000 for Wholesale Dealers / $50,000 for Retail Dealers

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$20,000 for Wholesale Dealers / $100,000 for Retail Dealers

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Never advertise or sell a Used Car as “Certified” if:

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The odometer does not indicate the actual mileage of the vehicle

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The title is branded (lemon law, salvage, junk, non-repairable, etc.)

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The vehicle has frame damage or sold "as is"

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If a vehicle’s odometer is repaired and cannot register the same mileage as before the repair:

Set the odometer to mileage based on the condition of the vehicle

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Set the odometer to read "0" (zero) with a notice attached to the vehicle’s left door frame by the person performing the service or repair

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Dealers must securely store their Reports of Sale at their principal place of business for:

Select ONLY the correct answer

6 months onsite, then 6 months longer off-site

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3 months (90 days) on-site, then 33 months more digitally or off-site

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24 months onsite, then 24 months longer off-site

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The “Car Buyer Bill of Rights” limits a Dealer’s compensation from an institution financing the purchase of a vehicle to:

1.0% for terms of 60 months or longer -or- 5% for terms up to 60 months

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2.5% for terms up to 60 months -or- 2.0% for terms of 60 months or longer

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10% for loans over $10,000

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When a Dealer sells a Lemon Law buyback vehicle, they must notify the buyer on letter-size paper of the following:

The year, make, model, and vehicle identification number
That the vehicle title is marked “Lemon Law Buyback”
The nature of each nonconformity reported by the vehicle’s original buyer or lessee
Any repairs made to the vehicle in an attempt to correct each nonconformity

True

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False

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Dealers must now renew their license online yearly (a two-year term is optional, later) and upload:

Proof of Continuing Education (every two years)
Proof of Surety Bond
Payment of Renewal Fees

True – Renewals must be done online

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False – Paper forms are still accepted

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Who may operate a vehicle with special plates for any purpose?

*Select ALL the correct answers

A sole owner, corporate officer, or director of a Dealer provided that individual is actively engaged in the management and control of the Dealer’s business operations

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A manager who is actively engaged in the management and control of the Dealer when no other individual meets the criteria above

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Children of the Dealership owner, not involved in operating the dealership

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A Conditional Sales Contract must include all of the following (for cars under $40k)

A Contract Cancellation Option with a “2-day cooling-off period”
All costs & terms of payment
Written disclosure(s) for any aftermarket add-on items
All financial aspects of the sale
Signatures of both the Buyer and the Seller

True

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False

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Dealers must disclose any vehicle modifications which alter the vehicle from the vehicle manufacturer’s original specification.

True

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False

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Who may operate a vehicle with special plates with limitations?

*Select ALL the correct answers

Employees of a Dealer when they are acting within and scope of their employment

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A prospective buyer or lessee, to test drive a vehicle (up to seven days)

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Employees picking up lunch for other employees

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Interest rates must be shown on the Contract as “APR*” so Buyers can understand the actual yearly cost of borrowing.

*APR means “Annual Percentage Rate”

True

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False

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What is a Dealer required to do when selling a vehicle with a 5-digit odometer that has passed 99,999 miles?

Check the "Mileage EXCEEDS the mechanical limits" box on the REG 262

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No action is required by the Dealer.

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Dealers are not allowed to sell or offer for sale a vehicle unless all of its safety equipment is in proper working condition unless:

Select ALL the correct answers

You warn the Buyer about the vehicle's safety defects

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The vehicle is sold to another Dealer

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The vehicle is used exclusively off-highway -or- being legally wrecked and dismantled

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The vehicle is leased, registered in California, and sold to the person leasing it

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A Dealer’s License is automatically canceled when the:

Dealer abandons or changes their location without immediately notifying the DMV
Dealer fails to maintain an adequate Surety Bond
Person designated as the Dealer has changed
Corporate status of the Dealer is suspended or revoked
CDTFA suspends or revokes the Dealer’s Seller’s Permit

True

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False

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An additional DMV License or Permit is not required for “display only” areas if:

The area is within 1,000 feet of your dealership
No sales take place within that area

True

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False

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Which of the following windshield and wiper statements is true?

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The windshield’s condition must not impair the driver’s vision

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The windshield defrosting device and windshield wipers must be in good operating condition and be capable of clearing the windshield

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Windshields are optional if the driver promises to always wear sunglasses

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For Temporary Branch Locations, Dealers must submit their application online and within 10 days before the event, upload the following:

Copy of lease/rental agreement or copy of the promoter’s contract
Property Use Verification for Vehicle Dealer’s License, OL 902 (required for some locations)

True

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False

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To open a Permanent Branch Location, Dealers must submit an Application for Occupational License online. Paper applications are no longer accepted.

True

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False

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Which of the following must have a Smog Certificate before being offered for sale?

Select ONLY the correct answers

Gasoline-powered vehicles, 1976 and newer (except those four years old or newer)

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Diesel-powered vehicles, 1998 and newer, with a GVWR of 14,000 pounds or less

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Vehicles four (4) model years old or newer

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Vehicles sold to other licensed Dealers or sold at auctions

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A vehicle must be in a Dealer’s inventory for sale (owned or lawfully possessed by the dealer) before anyone can use a Special (Dealer) Plate on it.

True

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False

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You may not sell any vehicle* unless it is equipped with seat belts for each seating position.

*Manufactured after January 1, 1968

True

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False

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After a Retail sale, the following documents must be submitted to the DMV for a transfer of ownership:

Select ONLY the correct answers

California Certificate of Title (or Application for Duplicate or Paperless Title)

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Transfer and Reassignment Form (REG 262) — with Power of Attorney

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Report of Sale (REG 51)

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Extended Warranty or Service Plan Agreements

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The maximum Service Fee a Dealer can charge for a smog test is:

Select ONLY the correct answer

$25

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$50

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$75

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Odometers must be in working condition at the time of sale. It is illegal to roll back, disconnect, or reset the odometer of any motor vehicle.

True

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False

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When the Buyer is financing, you must disclose and itemize the following:

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The vehicle's cash price ALONE

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Fees charged for Dealer add-ons, sales tax, registration fees, agreements (service contract, debt cancellation, Contract Cancellation, etc.), and prior balances owed on trade-ins

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The Total Cash Price

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You must register with the BAR (Bureau of Automotive Repair) as an Automotive Repair Dealer if your Dealership works on Consumer vehicles when:

The repairs that require mechanical expertise
The repairs are to a part of the vehicle essential to its safe operation
The Dealer receives compensation for any repair (including body repair work)

True

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False

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Some minor* repairs are permitted without BAR registration, including:

Repairs made as part of a business agreement between a repair dealer and a business or commercial enterprise
Repairing or replacing tires, lubricating vehicles, installing bulbs, batteries, wiper blades, and minor accessories
Replacing spark plugs, fan belts, filters, and other services customarily performed by gasoline service stations

True

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False

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Which of the following are correct statements regarding “Vehicle Service Contracts” sold by VSCPs (Vehicle Service Contract Providers)?

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The VSCP company must hold a special license from the California Dept of Insurance

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Only licensed vehicle dealers may legally sell a VSCP service contract

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Companies selling Service Contracts over the Internet directly to consumers are breaking the law

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If you collect estimated DMV fees that exceed the amount paid to the DMV, you must refund the difference to the Buyer.

A refund is due regardless of how small the amount is.

True

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False

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The maximum you may charge for Contract Cancellation Option Agreements is:

$75 for a vehicle costing $5,000 or less
$150 for a vehicle costing more than $5,000, but not more than $10,000
$250 for a vehicle costing more than $10,000, but not more than $30,000
One percent of the purchase price for a vehicle costing more than $30,000, but less than $40,000

True – there are legal limits to how much a Dealer can charge

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False – a Dealer can charge whatever the Buyer is willing to pay

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What items are taxable?

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The selling price of the Vehicle + Accessories installed

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The labor portion of the Smog Fee + the Document Preparation Fee

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DMV fees (license & registration)

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California State Smog Certificate fee

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You don’t have to tell a Buyer when you are selling them a former Rental, Police, or Taxi vehicle.

True

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False

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Dealers who fail to comply with the terms of a Consignment Agreement could have their license suspended or revoked.

True

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False

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California Used Vehicle Dealers are not required to disclose when a vehicle has had prior accidents or frame damage.

True

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False

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When Advertising, Dealers are required to:

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Identify themselves as a Dealer (including dealership name & license number)

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Identify the vehicle by its license number -or- VIN (last 6 digits or more) and the year, make, and model

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Disclose all Terms of Sale, including all costs (except taxes, registration fees, tire fee, smog fees, and DOC fee)

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Dealers must disclose all Terms of Financing, including any item purchased.

True

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False

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When a Wholesale or Retail Dealer plans to move from their licensed location, they must notify the DMV:

Within 10 days after moving

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Within 2 days after moving

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Immediately

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If the Dealer breaches the Contract after the Buyer leaves their vehicle as a down payment, you must within 5 days either:

Return the vehicle to the Buyer
Pay the Buyer the fair market value of the vehicle or its value as stated in the Contract (whichever is greater)

True

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False

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Dealers are required to provide Buyers with a separate, written “Notice to Vehicle Credit Applicant,” which discloses:

Each credit score obtained and used by the dealer
The date the credit score was created
The name of the consumer reporting agency for each credit score used by the dealer
The range of possible credit scores used to generate that credit score

True

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False

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You must post a Buyers Guide before you display a vehicle for sale even if the car is not fully prepared for delivery

True

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False

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License plates and the Vehicle Identification Number (VIN) can help identify stolen vehicles by searching the NMVTIS database.

True

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False

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When Dealers sell a Vehicle to a Consumer, they must:

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Attach the bottom tear-off section of the Report of Sale to the sold vehicle

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Submit the main (upper) portion of the REG 51 with other title transfer documents

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Dealers must collect Sales Tax whenever they sell a vehicle to a Consumer and remit this to the DMV (not to the CDTFA)*

*California Department of Tax & Fee Administration

True

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False

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Never use terms such as “No Down Payment” unless you will sell the vehicle to any qualified purchaser without prior payment (of any kind) or trade-in.

True

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False

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If a Dealer unknowingly sells a stolen vehicle, they are required to issue a full refund to the Buyer

True

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False

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Dealers must finalize a Used Vehicle application within:

30 days after the date of sale or 10 days after the DMV returned the application

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40 days after the date of sale or 20 days after the DMV returned the application

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50 days after the date of sale or 30 days after the DMV returned the application

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When a Dealers accepts a vehicle to sell as a Consignment, they must pay the Consignor (seller) within 20 days when either:

The Dealer receives the purchase price
The Dealer executes a Conditional Sales Contract
The Purchaser takes delivery of the vehicle

True

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False

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It is OK to use Coupons or Simulated Checks in an advertisement.

True

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False

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It is OK to lend your Dealer supplies or special plates to another Dealer if they are licensed.

True

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False

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Salespeople are allowed to sell vehicles anywhere as long as they don’t accept cash there.

True

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False

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Dealers must notify the DMV of Salesperson Termination within:

10 days

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20 days

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30 days

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When selling a Consignment vehicle, Dealers must provide an Agreement that includes a calculation of the vehicle’s Net Value, including:

The current market value and the source used
Outstanding lien(s) amount and the Lienholder(s)
The value of Repairs to be made and Work Order #
Money due to the Dealer, shown as a percent of the selling price, a flat fee, or a specific formulae

True

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False

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Retail Dealers are required to have a Display area with at least ____ dedicated parking space(s).

One

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Two

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Three

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Retail Dealers must have proper signage showing the Dealer’s name and address. It must be permanent, able to withstand weather conditions, erected on the exterior of the office, and be:

Not less than 5 square feet and readable from 100 feet

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Not less than 2 square feet and readable from 50 feet

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Not less than 10 square feet and readable from 75 feet

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Dealers are allowed to charge a “Document Processing Fee” for processing the Buyer’s vehicle into their name. Unless they have a contractual agreement with DMV to be a Private Industry Partner, the maximum fee a Dealer can charge is:

$50

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$70

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$90

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How many vehicles can an unlicensed, private individual sell per year with the intent to make a profit?

0

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5

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10

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A special/dealer plate may only be used on a vehicle owned or lawfully possessed by the dealer (it is in the dealer’s inventory for sale).

True

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False

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What is the proper location for a dealer/special plate?

As long as the dealer plate is visible to law enforcement, any location such as inside the back window is acceptable

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Dealer plates must be securely attached to the rear of the vehicle and should cover or replace the existing license plate

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When a dealer abandons their licensed location, they must notify the DMV:

Within 20 days

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Within 10 days

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Within 5 days

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Immediately

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When a Dealer sells a Consignment vehicle, they must complete a Conditional Sales contract, DMV Report of Sale, transfer documents, and collect fees and taxes as they would with any other vehicle sale to a Consumer.

The Dealer is NOT REQUIRED to complete a DMV Report of Sale or collect fees and taxes

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The Dealer MUST complete a DMV Report of Sale or collect fees and taxes

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How long does a Dealer have to withdraw an advertisement when the advertised vehicle is sold or no longer for sale?

24 hours

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48 hours

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1 week

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When the Dealer has time

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What is required to become a licensed Auto Broker?

You must be a Wholesale dealer with a home office and one parking space

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You must be a Retail dealer to add the Broker endorsement to your license

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Under what conditions is it legal to have the consumer purchasing the vehicle perform the smog check?

When the Customer is paying cash

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Never. It is always the Dealer's responsibility.

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California’s Vehicle Code, Division 12 — Equipment of Vehicles requires that you do not sell (or offer for sale) a vehicle unless all of its safety equipment is in proper working condition unless:

The vehicle is being sold "AS-IS"

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The customer is notified that the vehicle is unsafe in writing

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Dealers may never sell an unsafe vehicle to a consumer

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Dealers must renew their license before it expires. The DMV does allow an expired license to be renewed during a “30-Day Grace Period”.

Dealers can renew their expired License within the 30-day Grace Period

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Dealers can renew any expired License at any time if they pay a fine

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How often are Dealers required to complete a “Continuing Education” course from a DMV Approved provider?

Every two years

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Every year

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Continuing Education Training is optional and may be taken when the dealer has time

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A Dealer must provide a Fictitious Name Statement (also known as a DBA) when:

*Select ALL the correct answers

When applying as a Corporation or LLC and not using the exact Corporation or LLC name on the DMV Dealer Application

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When applying as an Individual and your Surname (last name) is not included in the business name on the DMV Dealer Application

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The DMV never requires a Fictitious Name filing

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When a Dealer offers a vehicle with a branded title for sale, the vehicle must display a red Warning Sticker confirming the vehicle has a branded title.

True

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False

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Although DMV regulations require dealers to retain all business records for three years, the Automobile Sales and Finance Act separately requires dealers to retain documents related to vehicle sales for at least:

3 years or the duration of the contract, whichever is greater.

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5 years or the duration of the contract, whichever is greater.

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7 years or the duration of the contract, whichever is greater.

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A registration fee, California Highway Patrol fee, Vehicle License fee (.65% of vehicle value), and county/district fees are due for most vehicles registered for on-highway use.

True

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False

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What is a common DMV Transfer Fee for a California-registered vehicle?

$10

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$18

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$15

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How long does the DMV have to investigate and complete the processing of your application?

60 days

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120 days

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180 days

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There is no time limit

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Deceased Dealers & Surviving Spouses

When a Dealer dies, the DMV may issue a “Certificate of Convenience” to the surviving spouse or other heir to exercise the privileges granted by special plates and license for one year from and after the date of death and necessary one-year renewals thereafter.

True – The surviving spouse or other heir may conduct the business of the deceased for one year.

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False – The deceased Dealer license is immediately cancelled.

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Dealers can generate their own Buyers Guide. Downloading from the FTC’s website or purchasing from a vendor is unnecessary.

Dealers CAN generate their own Guides if the wording, type style, type sizes, and format specified in the Rule are followed.

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Dealers CANNOT generate their own Guides. They must be downloaded from the FTC or purchased from a supplier.

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The California Vehicle Code (or CVC) contains almost all laws relating to the operation, ownership, and registration of vehicles in California.

True

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False

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The cost to Renew a Dealer license is less than to Apply and includes:

$125 renewal application fee
$92 fee for each dealer plate*
$94 fee for each motorcycle plate*
$75 autobroker endorsement fee

*Plus county fees, if applicable

Renewing costs LESS than Appyling

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Renewing costs the SAME as Applying

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Any acknowledgment to be signed by the buyer must be printed or written in a size equal to at least 10-point boldface type and appear directly above or adjacent to the buyer’s signature.

False – The Contract can be printed in any size as long as it is readable.

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True – The Contract must be written in at least a 10-point boldface type.

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The DMV Occupational License office will require your name on your Certificate to match your California driver’s license exactly. If it doesn’t match, they will reject it and not allow you to take the Dealer Test.

The Certificate name must match my legal name, not the name on my driver's license

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The Certificate name must exactly match my California Driver's license

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Dealer License Exam Practice Test (California DMV)

Quiz Summary

Information

Results

Results

Categories

You have completed the Practice Test

1. Question

What is the best way to prepare to pass the DMV in-person 40 question exam?

Hint

2. Question

The DMV in-person exam uses different questions than this Practice Test, but it tests the same information.

Hint

3. Question

ANY of the following actions could result in a Dealer license suspension:

Hint

ANY of the following actions could result in a Dealer license suspension:

4. Question

Retail Dealers (selling more than 6 vehicles per year) must display Federal Buyer’s Guide in plain view (with both sides visible) and may be either:

Hint

5. Question

State and Federal regulatory agencies have no authority over Dealers. Only the DMV can impose penalties should they fail to abide by the laws and regulations governing Dealers.

Hint

6. Question

Used Car Dealers must have a Surety Bond valued at:

Hint

7. Question

Never advertise or sell a Used Car as “Certified” if:

Hint

8. Question

If a vehicle’s odometer is repaired and cannot register the same mileage as before the repair:

Hint

9. Question

Dealers must securely store their Reports of Sale at their principal place of business for:

Hint

10. Question

The “Car Buyer Bill of Rights” limits a Dealer’s compensation from an institution financing the purchase of a vehicle to:

Hint

11. Question

When a Dealer sells a Lemon Law buyback vehicle, they must notify the buyer on letter-size paper of the following:

Hint

12. Question

Dealers must now renew their license online yearly (a two-year term is optional, later) and upload:

Hint

Dealers must now renew their license online yearly (a two-year term is optional, later) and upload:

13. Question

Who may operate a vehicle with special plates for any purpose?

Hint

14. Question

A Conditional Sales Contract must include all of the following (for cars under $40k)

Hint

15. Question

Dealers must disclose any vehicle modifications which alter the vehicle from the vehicle manufacturer’s original specification.

Hint

16. Question

Who may operate a vehicle with special plates with limitations?

Hint

17. Question

Interest rates must be shown on the Contract as “APR*” so Buyers can understand the actual yearly cost of borrowing.

Hint

18. Question

What is a Dealer required to do when selling a vehicle with a 5-digit odometer that has passed 99,999 miles?

Hint

19. Question

Dealers are not allowed to sell or offer for sale a vehicle unless all of its safety equipment is in proper working condition unless:

Hint

20. Question

A Dealer’s License is automatically canceled when the:

Hint

21. Question

An additional DMV License or Permit is not required for “display only” areas if:

Hint

22. Question

Which of the following windshield and wiper statements is true?

Hint

23. Question

For Temporary Branch Locations, Dealers must submit their application online and within 10 days before the event, upload the following:

Hint

24. Question

To open a Permanent Branch Location, Dealers must submit an Application for Occupational License online. Paper applications are no longer accepted.