AFIP Basic Certification Practice Exam
2026: 100 High-Yield Questions &
Answers Rationales
Overview
The AFIP (Association of Finance and Insurance Professionals) Basic
Certification is the industry standard for dealership compliance. It
identifies the Certified Professional in Financial Services (CPFS).
The exam tests mastery of federal and state regulations, contract law,
and the AFIP Code of Ethics.
Key Features
Three Modules: Federal Law (150 Qs), Ethics (25 Qs), and State Law
(25 Qs).
Passing Score: You must score at least 80% on each individual
module to pass.
The "Carlaw" Standard: Questions are based on the Carlaw F&I
Legal Desk Book.
Legal Focus: Heavy emphasis on Truth in Lending (Reg
Z), Consumer Leasing (Reg M), and Credit Reporting (FCRA).
1. Under the Truth in Lending Act (Regulation Z), which of the
following must be disclosed in the "Federal Box"?
A) The dealer's profit on the vehicle.
B) The Annual Percentage Rate (APR).
C) The name of the manufacturer.
D) The customer’s trade-in tire tread depth.
,2. What is the primary purpose of the Equal Credit Opportunity
Act (ECOA/Reg B)?
A) To ensure everyone gets a loan.
B) To prohibit discrimination in any aspect of a credit transaction.
C) To limit the interest rate a dealer can charge.
D) To force customers to buy life insurance.
Explanation: ECOA prohibits discrimination based on race, color,
religion, national origin, sex, marital status, or age.
3. When must a "Risk-Based Pricing Notice" be provided to a
customer?
A) Only if they are buying a truck.
B) When credit is granted on terms less favorable than those granted
to most other customers.
C) Every time a credit report is pulled.
D) Only at the end of the year.
Explanation: Under the FCRA, if a consumer receives less favorable
terms due to their credit report, they must be notified.
4. The "Red Flags Rule" is designed to prevent:
A) Speeding.
B) Identity Theft.
C) Low profit margins.
D) Engine failure.
Explanation: Dealerships must have a written program to identify and
respond to "red flags" that indicate identity theft.
5. Under Regulation M (Consumer Leasing), which of the
following is a required disclosure?
A) The Gross Capitalized Cost.
B) The name of the salesperson's spouse.
C) The color of the headliner.
D) The dealer's home address.
Explanation: Reg M requires transparency regarding the costs
associated with a lease, including the Cap Cost and Residual Value.
6. What is the "Holder in Due Course" Rule?
A) A rule about holding a car for 24 hours.
, B) A rule that allows a consumer to assert claims against a lender that
they have against the seller.
C) A rule about golf tournaments.
D) A rule that says the dealer always wins.
Explanation: This FTC rule preserves a consumer's right to sue the
finance company if the seller (the dealer) provided a defective product.
7. A "straw purchase" occurs when:
A) A customer buys a car with cash.
B) An individual with good credit applies for a loan for someone else
who cannot qualify.
C) A dealer sells a car with a sunroof.
D) A customer buys a vehicle for their business.
Explanation: Straw purchases are illegal and fraudulent because the
true operator of the vehicle is hidden from the lender.
8. The "Gramm-Leach-Bliley Act" (GLB) primarily governs:
A) How cars are washed.
B) The privacy and protection of non-public personal information
(NPI).
C) The height of the dealership sign.
D) The price of gasoline.
Explanation: GLB requires dealerships to provide Privacy Notices and
maintain a Safeguards Rule program to protect customer data.
9. What is the maximum cash amount a dealership can receive
without filing Form 8300?
A) $500
B) $5,000
C) $10,000
D) $25,000
Explanation: Any cash (or cash equivalent) transaction over $10,000
must be reported to the IRS via Form 8300 within 15 days.
10. "Tying" is an illegal practice that involves:
A) Tying a bow on a gift car.
B) Forcing a customer to buy one product (like a service contract) to
get another (like a lower interest rate).
C) Parking cars too close together.
D) Negotiating a fair price.
2026: 100 High-Yield Questions &
Answers Rationales
Overview
The AFIP (Association of Finance and Insurance Professionals) Basic
Certification is the industry standard for dealership compliance. It
identifies the Certified Professional in Financial Services (CPFS).
The exam tests mastery of federal and state regulations, contract law,
and the AFIP Code of Ethics.
Key Features
Three Modules: Federal Law (150 Qs), Ethics (25 Qs), and State Law
(25 Qs).
Passing Score: You must score at least 80% on each individual
module to pass.
The "Carlaw" Standard: Questions are based on the Carlaw F&I
Legal Desk Book.
Legal Focus: Heavy emphasis on Truth in Lending (Reg
Z), Consumer Leasing (Reg M), and Credit Reporting (FCRA).
1. Under the Truth in Lending Act (Regulation Z), which of the
following must be disclosed in the "Federal Box"?
A) The dealer's profit on the vehicle.
B) The Annual Percentage Rate (APR).
C) The name of the manufacturer.
D) The customer’s trade-in tire tread depth.
,2. What is the primary purpose of the Equal Credit Opportunity
Act (ECOA/Reg B)?
A) To ensure everyone gets a loan.
B) To prohibit discrimination in any aspect of a credit transaction.
C) To limit the interest rate a dealer can charge.
D) To force customers to buy life insurance.
Explanation: ECOA prohibits discrimination based on race, color,
religion, national origin, sex, marital status, or age.
3. When must a "Risk-Based Pricing Notice" be provided to a
customer?
A) Only if they are buying a truck.
B) When credit is granted on terms less favorable than those granted
to most other customers.
C) Every time a credit report is pulled.
D) Only at the end of the year.
Explanation: Under the FCRA, if a consumer receives less favorable
terms due to their credit report, they must be notified.
4. The "Red Flags Rule" is designed to prevent:
A) Speeding.
B) Identity Theft.
C) Low profit margins.
D) Engine failure.
Explanation: Dealerships must have a written program to identify and
respond to "red flags" that indicate identity theft.
5. Under Regulation M (Consumer Leasing), which of the
following is a required disclosure?
A) The Gross Capitalized Cost.
B) The name of the salesperson's spouse.
C) The color of the headliner.
D) The dealer's home address.
Explanation: Reg M requires transparency regarding the costs
associated with a lease, including the Cap Cost and Residual Value.
6. What is the "Holder in Due Course" Rule?
A) A rule about holding a car for 24 hours.
, B) A rule that allows a consumer to assert claims against a lender that
they have against the seller.
C) A rule about golf tournaments.
D) A rule that says the dealer always wins.
Explanation: This FTC rule preserves a consumer's right to sue the
finance company if the seller (the dealer) provided a defective product.
7. A "straw purchase" occurs when:
A) A customer buys a car with cash.
B) An individual with good credit applies for a loan for someone else
who cannot qualify.
C) A dealer sells a car with a sunroof.
D) A customer buys a vehicle for their business.
Explanation: Straw purchases are illegal and fraudulent because the
true operator of the vehicle is hidden from the lender.
8. The "Gramm-Leach-Bliley Act" (GLB) primarily governs:
A) How cars are washed.
B) The privacy and protection of non-public personal information
(NPI).
C) The height of the dealership sign.
D) The price of gasoline.
Explanation: GLB requires dealerships to provide Privacy Notices and
maintain a Safeguards Rule program to protect customer data.
9. What is the maximum cash amount a dealership can receive
without filing Form 8300?
A) $500
B) $5,000
C) $10,000
D) $25,000
Explanation: Any cash (or cash equivalent) transaction over $10,000
must be reported to the IRS via Form 8300 within 15 days.
10. "Tying" is an illegal practice that involves:
A) Tying a bow on a gift car.
B) Forcing a customer to buy one product (like a service contract) to
get another (like a lower interest rate).
C) Parking cars too close together.
D) Negotiating a fair price.
