2026 CA DEALER LICENSE EXAM: PRACTICE QUESTIONS AND STUDY GUIDE
CORE DOMAINS
Dealer Licensing, Bonding, and Educational Requirements
Advertising, Pricing, and Consumer Disclosure Rules
Odometer Disclosure and Title/Registration Procedures
Sales and Use Tax, Fees, and CDTFA Obligations
Vehicle Equipment, Smog, and Safety Compliance
Prohibited Acts, Enforcement, and Disciplinary Actions
Recordkeeping, Report of Sale, and Temporary Permits
Financing, Truth in Lending, and Contract Requirements
Introduction
The California Vehicle Dealer Licensing Examination is a proctored, multiple-choice assessment
administered by the Department of Motor Vehicles (DMV) Occupational Licensing Division. It evaluates a
candidate’s mastery of the California Vehicle Code (CVC), Title 13 regulations, consumer protection
statutes, and tax obligations applicable to retail and wholesale vehicle dealers. The exam emphasizes
scenario-based decision-making, ethical compliance, and accurate completion of departmental forms.
Candidates must demonstrate the ability to apply statutes to real-world transactions, identify prohibited
acts, and protect consumers. A minimum passing score of 70% is required, and the examination typically
contains approximately 100–150 questions, with the 2026 edition reflecting updated digital advertising,
EV sales, and data privacy standards.
SECTION ONE: STUDY GUIDE – KEY RULES AND STATUTES
Before attempting the practice questions, review the high-yield rules summarized below.
Licensing and Bonding Quick Reference
Every person applying for a used vehicle dealer license (retail or wholesale) must take and pass a
written exam; one person in the ownership structure who manages daily operations must pass.
Minimum passing score: 70%.
Required preliminary education: 4 hours before first exam.
Continuing education: 4 hours every 2 years; a managerial employee may complete it for the
dealer.
Wholesale-only dealers dealing with fewer than 50 registrable vehicles per year are exempt from
continuing education.
Retail dealer bond: $50,000**; wholesale dealer bond: **$10,000 (wholesale under 25 vehicles/year
may qualify for $10,000).
License validity: 2 years.
, Automatic cancellation occurs if the dealer abandons the established place of business, fails to
maintain an adequate bond, or has the CDTFA resale permit suspended/cancelled.
An unlicensed individual may sell up to 5 vehicles in a 12-month period before a dealer license is
required.
Advertising and Pricing Rules
A specific vehicle may not be advertised without identifying it by VIN or license number.
The advertised total price must include all costs to the purchaser at time of sale, except sales tax,
registration fees, and similar government charges.
Advertised price must remain valid until the advertisement is withdrawn or the vehicle is sold.
Claims such as “everyone financed” or “no credit rejected” are prohibited unless the dealer is willing
to extend credit under any and all circumstances.
Underselling claims (“lowest prices,” “we will beat any dealer’s price”) are prohibited unless
substantiated.
Used vehicles of the current or prior model year must be expressly disclosed as “used” in
advertising.
“On approved credit” must be clearly and conspicuously disclosed and unabbreviated.
Odometer Disclosure Rules
Written odometer disclosure is required for vehicles less than 10 model years old.
Disclosure must state whether mileage is “Actual,” “Not Actual,” or “Exceeds Mechanical Limits”.
If an odometer is incapable of registering the same mileage after service/repair/replacement, a
written notice must be attached to the left doorframe.
It is never legal to reset or alter an odometer reading to reflect fewer miles.
Disclosure is completed on the title or REG 262 (Vehicle/Vessel Transfer and Reassignment Form)
when the title lacks a disclosure section or additional disclosure is needed.
Sales and Use Tax Rules
The base statewide sales tax rate is 7.25%, but the total rate varies by city/county due to district
taxes.
The tax rate applied is generally based on the county where the registered owner resides (for
interstate/intercounty transactions, specific sourcing rules apply).
Dealers remit sales tax to the California Department of Tax and Fee Administration (CDTFA),
formerly the Board of Equalization.
Finance charges, insurance charges, and smog certification fees are not taxable.
Export sales may be exempt from California sales tax if the dealer obtains a Bill of Lading or other
documentation of delivery to a common carrier for foreign destination.
Dealers selling fewer than 1,000 vehicles per year may pay sales tax collected to the DMV when
transferring title; larger dealers report directly to CDTFA.
,Title, Registration, and Report of Sale Rules
For a used vehicle sale, the dealer must submit the registration application and fees to the DMV
within 30 days of the sale date to avoid penalties.
A Report of Sale (REG 51) must be submitted to the DMV within 5 days (excluding the sale date);
late submission incurs a $5.00 ASF penalty.
A dealer is not required to complete a Report of Sale when registering a used vehicle solely in the
dealership’s name.
A $50,000** bond is required for retail dealers; **$10,000 for wholesale dealers (with possible
reduction for low-volume wholesale).
The established place of business must include an office and a display area on the same property;
a main sign with the dealership name and address is required.
Dealers must notify the DMV immediately of a change in the established place of business.
Prohibited Acts and Consumer Protection
Selling a vehicle with a “Salvage” title brand requires disclosure to the retail customer before the
sale.
Selling a vehicle with a “Lemon Law Buyback” brand requires a disclosure statement to the buyer.
Failing to provide a valid smog certification for a covered used vehicle sale is a violation subject to
civil penalty and buyer remedies, including rescission.
Advertising a price that is not the actual sales price for all buyers (absent clear qualifiers) violates
CVC §11713.
Document processing charges are optional, must be disclosed, and are subject to a maximum cap.
The maximum fee a dealer may charge a customer for a smog test is $50.
SECTION TWO: PRACTICE QUESTIONS (1–100)
Question 1
Who is required to take the written dealer examination for a used vehicle dealer license in California?
A. Applicants for a new vehicle dealer license
B. Every person who applies for a used vehicle dealer license
C. Only wholesale dealers selling more than 50 vehicles per year
D. Only corporate applicants
✔B
RATIONALE: CVC §11704.5 requires every person applying for a used vehicle dealer license (retail or
wholesale) to pass the written examination; at least one person in the ownership structure who
manages daily operations must pass.
, Question 2
What is the minimum passing score for the California dealer written examination?
A. 60%
B. 70%
C. 80%
D. 90%
✔B
RATIONALE: Cal. Code Regs. Tit. 13, §268.04(a) sets the minimum passing score at 70%.
Question 3
Before taking the dealer examination for the first time, every applicant must successfully complete a
preliminary educational program of not less than:
A. 2 hours
B. 4 hours
C. 6 hours
D. 8 hours
✔B
RATIONALE: CVC §11704.5(b) requires a preliminary educational program of not less than four hours.
Question 4
What is the required bond amount for a retail vehicle dealer?
A. $10,000
B. $25,000
C. $50,000
D. $100,000
✔C
RATIONALE: Retail dealers must file a $50,000 surety bond with the DMV under CVC §11710.
Question 5
How long is an occupational dealer license valid before renewal is required?
A. 1 year
B. 2 years
CORE DOMAINS
Dealer Licensing, Bonding, and Educational Requirements
Advertising, Pricing, and Consumer Disclosure Rules
Odometer Disclosure and Title/Registration Procedures
Sales and Use Tax, Fees, and CDTFA Obligations
Vehicle Equipment, Smog, and Safety Compliance
Prohibited Acts, Enforcement, and Disciplinary Actions
Recordkeeping, Report of Sale, and Temporary Permits
Financing, Truth in Lending, and Contract Requirements
Introduction
The California Vehicle Dealer Licensing Examination is a proctored, multiple-choice assessment
administered by the Department of Motor Vehicles (DMV) Occupational Licensing Division. It evaluates a
candidate’s mastery of the California Vehicle Code (CVC), Title 13 regulations, consumer protection
statutes, and tax obligations applicable to retail and wholesale vehicle dealers. The exam emphasizes
scenario-based decision-making, ethical compliance, and accurate completion of departmental forms.
Candidates must demonstrate the ability to apply statutes to real-world transactions, identify prohibited
acts, and protect consumers. A minimum passing score of 70% is required, and the examination typically
contains approximately 100–150 questions, with the 2026 edition reflecting updated digital advertising,
EV sales, and data privacy standards.
SECTION ONE: STUDY GUIDE – KEY RULES AND STATUTES
Before attempting the practice questions, review the high-yield rules summarized below.
Licensing and Bonding Quick Reference
Every person applying for a used vehicle dealer license (retail or wholesale) must take and pass a
written exam; one person in the ownership structure who manages daily operations must pass.
Minimum passing score: 70%.
Required preliminary education: 4 hours before first exam.
Continuing education: 4 hours every 2 years; a managerial employee may complete it for the
dealer.
Wholesale-only dealers dealing with fewer than 50 registrable vehicles per year are exempt from
continuing education.
Retail dealer bond: $50,000**; wholesale dealer bond: **$10,000 (wholesale under 25 vehicles/year
may qualify for $10,000).
License validity: 2 years.
, Automatic cancellation occurs if the dealer abandons the established place of business, fails to
maintain an adequate bond, or has the CDTFA resale permit suspended/cancelled.
An unlicensed individual may sell up to 5 vehicles in a 12-month period before a dealer license is
required.
Advertising and Pricing Rules
A specific vehicle may not be advertised without identifying it by VIN or license number.
The advertised total price must include all costs to the purchaser at time of sale, except sales tax,
registration fees, and similar government charges.
Advertised price must remain valid until the advertisement is withdrawn or the vehicle is sold.
Claims such as “everyone financed” or “no credit rejected” are prohibited unless the dealer is willing
to extend credit under any and all circumstances.
Underselling claims (“lowest prices,” “we will beat any dealer’s price”) are prohibited unless
substantiated.
Used vehicles of the current or prior model year must be expressly disclosed as “used” in
advertising.
“On approved credit” must be clearly and conspicuously disclosed and unabbreviated.
Odometer Disclosure Rules
Written odometer disclosure is required for vehicles less than 10 model years old.
Disclosure must state whether mileage is “Actual,” “Not Actual,” or “Exceeds Mechanical Limits”.
If an odometer is incapable of registering the same mileage after service/repair/replacement, a
written notice must be attached to the left doorframe.
It is never legal to reset or alter an odometer reading to reflect fewer miles.
Disclosure is completed on the title or REG 262 (Vehicle/Vessel Transfer and Reassignment Form)
when the title lacks a disclosure section or additional disclosure is needed.
Sales and Use Tax Rules
The base statewide sales tax rate is 7.25%, but the total rate varies by city/county due to district
taxes.
The tax rate applied is generally based on the county where the registered owner resides (for
interstate/intercounty transactions, specific sourcing rules apply).
Dealers remit sales tax to the California Department of Tax and Fee Administration (CDTFA),
formerly the Board of Equalization.
Finance charges, insurance charges, and smog certification fees are not taxable.
Export sales may be exempt from California sales tax if the dealer obtains a Bill of Lading or other
documentation of delivery to a common carrier for foreign destination.
Dealers selling fewer than 1,000 vehicles per year may pay sales tax collected to the DMV when
transferring title; larger dealers report directly to CDTFA.
,Title, Registration, and Report of Sale Rules
For a used vehicle sale, the dealer must submit the registration application and fees to the DMV
within 30 days of the sale date to avoid penalties.
A Report of Sale (REG 51) must be submitted to the DMV within 5 days (excluding the sale date);
late submission incurs a $5.00 ASF penalty.
A dealer is not required to complete a Report of Sale when registering a used vehicle solely in the
dealership’s name.
A $50,000** bond is required for retail dealers; **$10,000 for wholesale dealers (with possible
reduction for low-volume wholesale).
The established place of business must include an office and a display area on the same property;
a main sign with the dealership name and address is required.
Dealers must notify the DMV immediately of a change in the established place of business.
Prohibited Acts and Consumer Protection
Selling a vehicle with a “Salvage” title brand requires disclosure to the retail customer before the
sale.
Selling a vehicle with a “Lemon Law Buyback” brand requires a disclosure statement to the buyer.
Failing to provide a valid smog certification for a covered used vehicle sale is a violation subject to
civil penalty and buyer remedies, including rescission.
Advertising a price that is not the actual sales price for all buyers (absent clear qualifiers) violates
CVC §11713.
Document processing charges are optional, must be disclosed, and are subject to a maximum cap.
The maximum fee a dealer may charge a customer for a smog test is $50.
SECTION TWO: PRACTICE QUESTIONS (1–100)
Question 1
Who is required to take the written dealer examination for a used vehicle dealer license in California?
A. Applicants for a new vehicle dealer license
B. Every person who applies for a used vehicle dealer license
C. Only wholesale dealers selling more than 50 vehicles per year
D. Only corporate applicants
✔B
RATIONALE: CVC §11704.5 requires every person applying for a used vehicle dealer license (retail or
wholesale) to pass the written examination; at least one person in the ownership structure who
manages daily operations must pass.
, Question 2
What is the minimum passing score for the California dealer written examination?
A. 60%
B. 70%
C. 80%
D. 90%
✔B
RATIONALE: Cal. Code Regs. Tit. 13, §268.04(a) sets the minimum passing score at 70%.
Question 3
Before taking the dealer examination for the first time, every applicant must successfully complete a
preliminary educational program of not less than:
A. 2 hours
B. 4 hours
C. 6 hours
D. 8 hours
✔B
RATIONALE: CVC §11704.5(b) requires a preliminary educational program of not less than four hours.
Question 4
What is the required bond amount for a retail vehicle dealer?
A. $10,000
B. $25,000
C. $50,000
D. $100,000
✔C
RATIONALE: Retail dealers must file a $50,000 surety bond with the DMV under CVC §11710.
Question 5
How long is an occupational dealer license valid before renewal is required?
A. 1 year
B. 2 years
