Colorado Car Sales Practice Test

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What must an advertisement state if it includes a rate of finance charge?

The annual percentage rate
The interest per month
The total cost of the vehicle
The down payment required

The correct answer is: The annual percentage rate

When an advertisement includes a rate of finance charge, it is essential to state the annual percentage rate (APR). The APR is a standardized measure that represents the cost of borrowing on a yearly basis, expressed as a percentage of the loan amount. This transparency is crucial because it allows potential buyers to compare financing options more easily across different loans and financial institutions. By presenting the APR, consumers can better understand the long-term cost of the financing, including any interest, fees, and other charges that may be associated with the loan, making informed decisions about their purchases. This regulatory requirement safeguards consumers and promotes fair advertising practices within the auto financing industry. Other options, while relevant to the overall cost of purchasing a vehicle, do not specifically address the mandatory disclosure aspect related to finance charges in advertisements.