Colorado Car Sales Practice Test

What must be done if a title has been surrendered under a Floor Plan agreement?

1. The dealer must have evidence of the surrender

2. The vehicle must be returned to the manufacturer

3. It may be sold freely

4. It can be transferred to another dealer

The correct answer is: The dealer must have evidence of the surrender

When a title has been surrendered under a Floor Plan agreement, the dealer must have evidence of the surrender. This is crucial because the Floor Plan agreement typically involves financing arrangements where the title is held by a lender or finance company as collateral for the loan used to purchase the vehicle. Having documentation of the surrender is essential for both legal protection and to ensure compliance with the terms of the Floor Plan arrangement. It serves as proof that the dealer adheres to necessary procedures and responsibilities outlined in the agreement, thereby safeguarding against potential disputes and ensuring proper inventory management. The other options do not reflect the procedural requirements associated with a surrendered title under such agreements. For example, selling the vehicle freely or transferring it to another dealer without appropriate documentation could violate the terms of the Floor Plan, which specifically governs how the vehicle can be handled until the loan is paid off or the collateral is otherwise released. Returning the vehicle to the manufacturer is not typically a requirement unless stipulated under specific terms, which does not apply universally in all Floor Plan agreements.