The maximum down payment is the lesser of $1,000 and 10% of the contract price excluding finance charges.

The maximum down payment is the lesser of $1,000 and 10% of the contract price excluding finance charges.

• A. The greater of $1,000 and 10% of the contract price
• B. The lesser of $2,000 and 5% of the contract price
• C. The lesser of $1,000 and 10% of the contract price excluding finance charges
• D. The lesser of $1,000 and 10% of the contract price including finance charges

Answer: (C)

The key idea is that the maximum down payment is determined by comparing two amounts and taking the smaller one. You have a fixed cap of $1,000 and a percentage cap of 10% of the contract price, but the percentage is based on the contract price excluding any finance charges. So the maximum is the lesser of those two values. This keeps the down payment from exceeding either a set dollar limit or a meaningful portion of the base price before financing. For example, if the contract price excluding finance charges is $6,000, 10% is $600, so the max down payment is $600. If the contract price excluding finance charges is $12,000, 10% is $1,200, which exceeds the $1,000 cap, so the max down payment is $1,000. The other options don’t fit because they either use the greater amount, apply different figures, or base the calculation on the contract price including finance charges rather than excluding them.

The key idea is that the maximum down payment is determined by comparing two amounts and taking the smaller one. You have a fixed cap of $1,000 and a percentage cap of 10% of the contract price, but the percentage is based on the contract price excluding any finance charges. So the maximum is the lesser of those two values. This keeps the down payment from exceeding either a set dollar limit or a meaningful portion of the base price before financing.

For example, if the contract price excluding finance charges is $6,000, 10% is $600, so the max down payment is $600. If the contract price excluding finance charges is $12,000, 10% is $1,200, which exceeds the $1,000 cap, so the max down payment is $1,000.

The other options don’t fit because they either use the greater amount, apply different figures, or base the calculation on the contract price including finance charges rather than excluding them.