AFIP CERTIFICATION QUESTIONS &
UPDATED ANSWERS PASSED
ALREADY GRADED A+ LATEST
VERSION
(True/False): Ignorance of the law will shield you from liability if you are noncompliant. -
Correct Answer ✔✔ False
(True/False): As an F&I manager working directly with customers, you are individually
responsible for your actions and what you say to each customer. - Correct Answer ✔✔
True
In a typical credit transaction the (bank)/(dealer) is the creditor. - Correct Answer ✔✔
The dealer is the creditor
What is a contract? - Correct Answer ✔✔ A contract is an agreement involving a
promise or set of promises that the law enforces or protects.
The formation of a contract requires three elements: - Correct Answer ✔✔ 1. Offer
2. Acceptance
3. Consideration
An offer consists of three elements: - Correct Answer ✔✔ 1. An expression of a promise
or commitment (intent) to enter a contract
2. An expression of definite and certain terms
3. The communication of the offer to the offeree (in this case, the customer)
An offer may be terminated by: - Correct Answer ✔✔ 1. An act of the parties
2. The operation of law
There are three criteria for the acceptance of an offer: - Correct Answer ✔✔ 1. The offer
is accepted by one who is entitled to accept
2. The acceptance takes the proper form and is timely
3. The terms of acceptance reflect closely the terms of the offer and, therefore, do not
amount to a counteroffer
The Statute of Frauds - Correct Answer ✔✔ Generally requires that all contracts
involving the sale of goods for a price of $500 or more be in writing.
The Statute of Frauds requires a written contract for the sale of goods for a price of
_______ or more. - Correct Answer ✔✔ $500
,What is required in order for the parties (the individuals entering into the contract) to
have "legal capacity?" - Correct Answer ✔✔ The parties to the contract must be of legal
age under the laws of the state in which the contract is written.
Criteria that can block the formation of a valid contract: - Correct Answer ✔✔ 1. The
need for a written agreement under the Statute of Frauds and certain provisions of the
Uniform Commercial Code (U.C.C.)
2. The need for legal capacity of a party to contract
3. The act of fraudulent inducement
What is "consideration" as it applies to a contract? - Correct Answer ✔✔ The
requirement that each party to the contract receives something of value in exchange for
what is given.
Finance Charge - Correct Answer ✔✔ The Finance Charge is the resulting dollar
amount calculated by applying the Annual Percentage Rate to the Amount Financed
over the term of the contract.
How the Itemization of Amount Financed is completed - Correct Answer ✔✔ 1. Cash
Price (Agreed to price of vehicle)
2. Total Downpayment
3. Unpaid Balance of Cash Price(Cash Price-Downpayment)
4. Other Charges (GAP, VSC, Etc.)
5. Amount Financed
4 Key Sections of an installment sale contract - Correct Answer ✔✔ Section A) General
Information -- Identifies the parties to the agreement.
Section B) Mandated Disclosures -- Disclosures required by TILA
Section C) Insurance-Related Disclosures --Credit insurance is optional
Section D) Signature Blocks - Notice to Buyer Disclosures --Bind all parties to contract
The introductory information and promise to pay contained in Section A of Retail
Installment Form - Correct Answer ✔✔ Promise to Pay - This section outlines the
purpose of the transaction and the primary obligations that will be incurred from signing
the contract.
The difference between full or partial recourse and no recourse assignments. - Correct
Answer ✔✔ Essentially determines the length of time, if any, the seller is responsible for
the actions of the buyer.
Warranty disclaimers do not apply to _______ warranties on new or used vehicles to
which that warranty still applies. - Correct Answer ✔✔ Manufacturer's
,A(n) _______ clause allows the creditor to declare the entire outstanding balance due
and payable. - Correct Answer ✔✔ Acceleration
As recorded on an installment sale agreement, the total sale price or deferred contract
price would be the total of the ________. - Correct Answer ✔✔ -Payments
-Downpayment
-Net Trade-In
Which is NOT listed as a mandated TILA box disclosure? - Correct Answer ✔✔ Holder-
in-Due Course Notice
In most states, the _______ is deemed to be part of the purchase agreement. - Correct
Answer ✔✔ Buyer's Guide
(True/False) Because the late charges that may be imposed on an installment sale
agreement are regulated at the state level, the amount of the late charge is NOT a
required disclosure item. - Correct Answer ✔✔ False
At the time of consummation, an installment sale contract is between the _______ and
the _______. - Correct Answer ✔✔ Customer, Dealer
The Truth in Lending Act and Reg. Z govern installment sale transactions for vehicles
purchased for what type(s) of uses? - Correct Answer ✔✔ Personal, Family or
Household
What is always the largest number on an installment sale agreement? - Correct Answer
✔✔ The total sale price
What does "force-placed" or "creditor-placed" mean? - Correct Answer ✔✔ Allows the
creditor to force place insurance - that is, buy physical damage insurance to cover the
creditor's interest in the vehicle or the creditor's and the buyer's interest in the vehicle if
the buyer fails to do so.
(True/False) Installment sale agreements notify the customer of the state's laws
regarding repossession and how (if applicable) the customer can redeem the vehicle or
reinstate the contract. - Correct Answer ✔✔ True
How are installment sale contracts regulated? - Correct Answer ✔✔ By federal and
state law
(True/False) If the vehicle is declared a total loss, the creditor may claim the proceeds
from the physical damage insurance. - Correct Answer ✔✔ True
, Closed-End Credit - Correct Answer ✔✔ A fixed amount of money borrowed for a
specified period of time, such as for home mortgages, vehicle purchases and other
types of installment-based financing.
Closed-End Credit Terminology (Customer Arranged) - Correct Answer ✔✔ Transaction
-- Loan
Document -- Note
Cost of Credit -- Interest
Cost of credit stated as -- APR
Parties to the agreement -- Lender- customer
Closed-End Credit Terminology (Dealer Arranged) - Correct Answer ✔✔ Transaction --
Credit Sale
Document -- Installment Sale Agreement
Cost of Credit -- Finance Charge
Cost of credit stated as -- APR
Parties to the agreement -- Dealer- customer-assigned to a lender or captive finance
source
Precomputed Interest - Correct Answer ✔✔ The cost of credit (finance charge) is
calculated upfront when the agreement is computed and repaid monthly over its term.
Simple Interest - Correct Answer ✔✔ The cost of credit (finance charge) is calculated
daily based on the outstanding balance and paid monthly. For the customer, the only
advantage to an agreement based on simple interest finance charge is if it does not run
full term.
The Rule of 78s - Correct Answer ✔✔ Most common method for calculating
precomputed interest. Allows the creditor to claim a greater portion of the finance
charge during the initial part of the repayment period. Under the Rule of 78, periods are
weighted by comparing their numerical values to the sum of all the digits of the periods.
The weights are applied in reverse, applying large weights to early periods.
Pro Rata Refunds - Correct Answer ✔✔ The term of the agreement is treated as being
composed of equal units, with a refund based on an equal-unit apportionment of the
length of time the agreement has been in force.
A pickup payment may be treated as part of the down payment if it is: - Correct Answer
✔✔ Payable no later than the due date of the second otherwise regularly scheduled
payment, not subject to a finance charge, and not included in the amount financed.
(True/False) In situations in which the customer has the option of purchasing credit
insurance (when the lender doesn't require the coverage as a condition of granting the
loan), the dollar amount of the premium must be added to the finance charge and
computed as part of the APR. - Correct Answer ✔✔ False
UPDATED ANSWERS PASSED
ALREADY GRADED A+ LATEST
VERSION
(True/False): Ignorance of the law will shield you from liability if you are noncompliant. -
Correct Answer ✔✔ False
(True/False): As an F&I manager working directly with customers, you are individually
responsible for your actions and what you say to each customer. - Correct Answer ✔✔
True
In a typical credit transaction the (bank)/(dealer) is the creditor. - Correct Answer ✔✔
The dealer is the creditor
What is a contract? - Correct Answer ✔✔ A contract is an agreement involving a
promise or set of promises that the law enforces or protects.
The formation of a contract requires three elements: - Correct Answer ✔✔ 1. Offer
2. Acceptance
3. Consideration
An offer consists of three elements: - Correct Answer ✔✔ 1. An expression of a promise
or commitment (intent) to enter a contract
2. An expression of definite and certain terms
3. The communication of the offer to the offeree (in this case, the customer)
An offer may be terminated by: - Correct Answer ✔✔ 1. An act of the parties
2. The operation of law
There are three criteria for the acceptance of an offer: - Correct Answer ✔✔ 1. The offer
is accepted by one who is entitled to accept
2. The acceptance takes the proper form and is timely
3. The terms of acceptance reflect closely the terms of the offer and, therefore, do not
amount to a counteroffer
The Statute of Frauds - Correct Answer ✔✔ Generally requires that all contracts
involving the sale of goods for a price of $500 or more be in writing.
The Statute of Frauds requires a written contract for the sale of goods for a price of
_______ or more. - Correct Answer ✔✔ $500
,What is required in order for the parties (the individuals entering into the contract) to
have "legal capacity?" - Correct Answer ✔✔ The parties to the contract must be of legal
age under the laws of the state in which the contract is written.
Criteria that can block the formation of a valid contract: - Correct Answer ✔✔ 1. The
need for a written agreement under the Statute of Frauds and certain provisions of the
Uniform Commercial Code (U.C.C.)
2. The need for legal capacity of a party to contract
3. The act of fraudulent inducement
What is "consideration" as it applies to a contract? - Correct Answer ✔✔ The
requirement that each party to the contract receives something of value in exchange for
what is given.
Finance Charge - Correct Answer ✔✔ The Finance Charge is the resulting dollar
amount calculated by applying the Annual Percentage Rate to the Amount Financed
over the term of the contract.
How the Itemization of Amount Financed is completed - Correct Answer ✔✔ 1. Cash
Price (Agreed to price of vehicle)
2. Total Downpayment
3. Unpaid Balance of Cash Price(Cash Price-Downpayment)
4. Other Charges (GAP, VSC, Etc.)
5. Amount Financed
4 Key Sections of an installment sale contract - Correct Answer ✔✔ Section A) General
Information -- Identifies the parties to the agreement.
Section B) Mandated Disclosures -- Disclosures required by TILA
Section C) Insurance-Related Disclosures --Credit insurance is optional
Section D) Signature Blocks - Notice to Buyer Disclosures --Bind all parties to contract
The introductory information and promise to pay contained in Section A of Retail
Installment Form - Correct Answer ✔✔ Promise to Pay - This section outlines the
purpose of the transaction and the primary obligations that will be incurred from signing
the contract.
The difference between full or partial recourse and no recourse assignments. - Correct
Answer ✔✔ Essentially determines the length of time, if any, the seller is responsible for
the actions of the buyer.
Warranty disclaimers do not apply to _______ warranties on new or used vehicles to
which that warranty still applies. - Correct Answer ✔✔ Manufacturer's
,A(n) _______ clause allows the creditor to declare the entire outstanding balance due
and payable. - Correct Answer ✔✔ Acceleration
As recorded on an installment sale agreement, the total sale price or deferred contract
price would be the total of the ________. - Correct Answer ✔✔ -Payments
-Downpayment
-Net Trade-In
Which is NOT listed as a mandated TILA box disclosure? - Correct Answer ✔✔ Holder-
in-Due Course Notice
In most states, the _______ is deemed to be part of the purchase agreement. - Correct
Answer ✔✔ Buyer's Guide
(True/False) Because the late charges that may be imposed on an installment sale
agreement are regulated at the state level, the amount of the late charge is NOT a
required disclosure item. - Correct Answer ✔✔ False
At the time of consummation, an installment sale contract is between the _______ and
the _______. - Correct Answer ✔✔ Customer, Dealer
The Truth in Lending Act and Reg. Z govern installment sale transactions for vehicles
purchased for what type(s) of uses? - Correct Answer ✔✔ Personal, Family or
Household
What is always the largest number on an installment sale agreement? - Correct Answer
✔✔ The total sale price
What does "force-placed" or "creditor-placed" mean? - Correct Answer ✔✔ Allows the
creditor to force place insurance - that is, buy physical damage insurance to cover the
creditor's interest in the vehicle or the creditor's and the buyer's interest in the vehicle if
the buyer fails to do so.
(True/False) Installment sale agreements notify the customer of the state's laws
regarding repossession and how (if applicable) the customer can redeem the vehicle or
reinstate the contract. - Correct Answer ✔✔ True
How are installment sale contracts regulated? - Correct Answer ✔✔ By federal and
state law
(True/False) If the vehicle is declared a total loss, the creditor may claim the proceeds
from the physical damage insurance. - Correct Answer ✔✔ True
, Closed-End Credit - Correct Answer ✔✔ A fixed amount of money borrowed for a
specified period of time, such as for home mortgages, vehicle purchases and other
types of installment-based financing.
Closed-End Credit Terminology (Customer Arranged) - Correct Answer ✔✔ Transaction
-- Loan
Document -- Note
Cost of Credit -- Interest
Cost of credit stated as -- APR
Parties to the agreement -- Lender- customer
Closed-End Credit Terminology (Dealer Arranged) - Correct Answer ✔✔ Transaction --
Credit Sale
Document -- Installment Sale Agreement
Cost of Credit -- Finance Charge
Cost of credit stated as -- APR
Parties to the agreement -- Dealer- customer-assigned to a lender or captive finance
source
Precomputed Interest - Correct Answer ✔✔ The cost of credit (finance charge) is
calculated upfront when the agreement is computed and repaid monthly over its term.
Simple Interest - Correct Answer ✔✔ The cost of credit (finance charge) is calculated
daily based on the outstanding balance and paid monthly. For the customer, the only
advantage to an agreement based on simple interest finance charge is if it does not run
full term.
The Rule of 78s - Correct Answer ✔✔ Most common method for calculating
precomputed interest. Allows the creditor to claim a greater portion of the finance
charge during the initial part of the repayment period. Under the Rule of 78, periods are
weighted by comparing their numerical values to the sum of all the digits of the periods.
The weights are applied in reverse, applying large weights to early periods.
Pro Rata Refunds - Correct Answer ✔✔ The term of the agreement is treated as being
composed of equal units, with a refund based on an equal-unit apportionment of the
length of time the agreement has been in force.
A pickup payment may be treated as part of the down payment if it is: - Correct Answer
✔✔ Payable no later than the due date of the second otherwise regularly scheduled
payment, not subject to a finance charge, and not included in the amount financed.
(True/False) In situations in which the customer has the option of purchasing credit
insurance (when the lender doesn't require the coverage as a condition of granting the
loan), the dollar amount of the premium must be added to the finance charge and
computed as part of the APR. - Correct Answer ✔✔ False
