Trevor goes to the AutoShop and purchases a new truck on credit for his business. He signs an agreement with AutoShop under which the truck is the collateral for AutoShop's loan to him. Trevor then goes to First Bank and signs an agreement for a loan so that he can buy supplies for his business. Do either of these agreements involve a purchase-money security interest?

A) The agreement with AutoShop is a purchase-money security interest.
B) The agreement with First Bank is a purchase-money security interest.
C) Both agreements are a purchase-money security interest.
D) Neither of the agreements involved a purchase-money security interest.
E) The agreement with AutoShop is a primary purchase-money security interest and the agreement with First Bank is a secondary purchase-money security interest.

Question

Chloe Eastridge · Accepted Answer

Final Answer : A, Explanation :  The agreement with AutoShop is a purchase-money security interest because it involves financing for the purchase of specific collateral (the truck) where the collateral secures the debt. The agreement with First Bank does not qualify as it is not directly tied to the purchase of specific collateral.

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