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CALIFORNIA DEALER LICENSE TEST
NEWEST EXAM 2026 | ALL QUESTIONS AND
CORRECT DETAILED ANSWERS |RATED A
+ | NEW AND REVISED
1. A primary purpose of requiring a California dealer license is to:
A. Increase vehicle prices statewide
B. Limit competition between dealers
C. Protect consumers and ensure compliance with vehicle laws
D. Reduce DMV workload
Rationale: Licensing ensures dealers meet legal, ethical, and
operational standards to protect consumers.
2. Which agency issues California vehicle dealer licenses?
A. California Highway Patrol
B. California Department of Motor Vehicles
C. Bureau of Automotive Repair
D. Secretary of State
Rationale: The DMV’s Occupational Licensing Division
regulates vehicle dealers.
3. A “dealer” under California Vehicle Code is best defined as a
person who:
A. Sells only their personal vehicle
B. Auctions vehicles occasionally
C. Buys or sells vehicles for resale as a business
D. Repairs vehicles for compensation
Rationale: Dealers engage in buying and selling vehicles as a
business activity.
4. How many vehicles may an unlicensed individual sell in California
within a 12-month period?
A. 1
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B. 2
C. 5
D. Unlimited
Rationale: Selling more than five vehicles requires a dealer
license.
5. Which of the following requires a dealer license?
A. Selling a vehicle inherited from a relative
B. Selling a vehicle to a junk dealer
C. Buying vehicles at auction for resale
D. Donating a vehicle to charity
Rationale: Buying for resale constitutes dealer activity.
6. A California dealer license is generally valid for:
A. 6 months
B. 1 year
C. 2 years
D. 5 years
Rationale: Dealer licenses are typically issued for two-year
periods.
7. Which document proves a dealer has financial responsibility?
A. Seller’s permit
B. Surety bond
C. Business license
D. Zoning permit
Rationale: The bond protects consumers from dealer misconduct.
8. The minimum required dealer bond amount in California is:
A. $10,000
B. $50,000
C. $75,000
D. $100,000
Rationale: California law requires a $50,000 dealer bond.
9. A dealer’s bond primarily protects:
A. The dealer
B. The DMV
C. Consumers and the state
D. Employees
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Rationale: Bonds compensate harmed consumers and ensure
legal compliance.
10. Which location requirement applies to dealer offices?
A. Must be inside a residence
B. Must be mobile
C. Must meet zoning and display requirements
D. Must be located at DMV
Rationale: Dealers must comply with zoning and facility
standards.
11. A dealer’s place of business must display:
A. Only hours of operation
B. Bond certificate
C. Business name and license number
D. Price lists
Rationale: Displaying identity promotes transparency.
12. Dealer plates may be used for:
A. Personal commuting
B. Demonstration and business purposes
C. Lending to friends
D. Long-term personal use
Rationale: Dealer plates are restricted to business use.
13. Misuse of dealer plates can result in:
A. Warning only
B. Reduced bond
C. Fines and license discipline
D. Tax audit
Rationale: Plate misuse is a serious violation.
14. Which record must dealers maintain?
A. Personal tax returns
B. Purchase and sales records
C. Employee medical records
D. Customer credit reports indefinitely
Rationale: Accurate records ensure traceability and compliance.
15. Dealer records must generally be retained for at least:
A. 6 months
CALIFORNIA DEALER LICENSE TEST
NEWEST EXAM 2026 | ALL QUESTIONS AND
CORRECT DETAILED ANSWERS |RATED A
+ | NEW AND REVISED
1. A primary purpose of requiring a California dealer license is to:
A. Increase vehicle prices statewide
B. Limit competition between dealers
C. Protect consumers and ensure compliance with vehicle laws
D. Reduce DMV workload
Rationale: Licensing ensures dealers meet legal, ethical, and
operational standards to protect consumers.
2. Which agency issues California vehicle dealer licenses?
A. California Highway Patrol
B. California Department of Motor Vehicles
C. Bureau of Automotive Repair
D. Secretary of State
Rationale: The DMV’s Occupational Licensing Division
regulates vehicle dealers.
3. A “dealer” under California Vehicle Code is best defined as a
person who:
A. Sells only their personal vehicle
B. Auctions vehicles occasionally
C. Buys or sells vehicles for resale as a business
D. Repairs vehicles for compensation
Rationale: Dealers engage in buying and selling vehicles as a
business activity.
4. How many vehicles may an unlicensed individual sell in California
within a 12-month period?
A. 1
,2|Page
B. 2
C. 5
D. Unlimited
Rationale: Selling more than five vehicles requires a dealer
license.
5. Which of the following requires a dealer license?
A. Selling a vehicle inherited from a relative
B. Selling a vehicle to a junk dealer
C. Buying vehicles at auction for resale
D. Donating a vehicle to charity
Rationale: Buying for resale constitutes dealer activity.
6. A California dealer license is generally valid for:
A. 6 months
B. 1 year
C. 2 years
D. 5 years
Rationale: Dealer licenses are typically issued for two-year
periods.
7. Which document proves a dealer has financial responsibility?
A. Seller’s permit
B. Surety bond
C. Business license
D. Zoning permit
Rationale: The bond protects consumers from dealer misconduct.
8. The minimum required dealer bond amount in California is:
A. $10,000
B. $50,000
C. $75,000
D. $100,000
Rationale: California law requires a $50,000 dealer bond.
9. A dealer’s bond primarily protects:
A. The dealer
B. The DMV
C. Consumers and the state
D. Employees
, 3|Page
Rationale: Bonds compensate harmed consumers and ensure
legal compliance.
10. Which location requirement applies to dealer offices?
A. Must be inside a residence
B. Must be mobile
C. Must meet zoning and display requirements
D. Must be located at DMV
Rationale: Dealers must comply with zoning and facility
standards.
11. A dealer’s place of business must display:
A. Only hours of operation
B. Bond certificate
C. Business name and license number
D. Price lists
Rationale: Displaying identity promotes transparency.
12. Dealer plates may be used for:
A. Personal commuting
B. Demonstration and business purposes
C. Lending to friends
D. Long-term personal use
Rationale: Dealer plates are restricted to business use.
13. Misuse of dealer plates can result in:
A. Warning only
B. Reduced bond
C. Fines and license discipline
D. Tax audit
Rationale: Plate misuse is a serious violation.
14. Which record must dealers maintain?
A. Personal tax returns
B. Purchase and sales records
C. Employee medical records
D. Customer credit reports indefinitely
Rationale: Accurate records ensure traceability and compliance.
15. Dealer records must generally be retained for at least:
A. 6 months
