CLFP Equipment Finance Certification Practice Exam

Which statement about PMSI priority is true?

PMSI priority is granted automatically without filing. PMSI priority depends on physical possession of the asset. PMSI cannot have priority over other security interests. PMSI has priority over other security interests in the same equipment if filed within a certain time period.

Correct Answer:

PMSI has priority over other security interests in the same equipment if filed within a certain time period.

Explanation:

The main idea is that a Purchase Money Security Interest can outrank other security interests in the same equipment, but only if it is properly perfected within a required time window after the debtor takes possession. A PMSI arises when the creditor finances the purchase of the collateral, and. to obtain priority, the security interest must be perfected by filing a financing statement (not automatically granted) within the specified period after delivery of the equipment. If that timing is met, the PMSI in the equipment has priority over competing interests in the same collateral; if the filing or timing is missed, other secured parties can take precedence. Possession alone does not give priority, and PMSIs can indeed have priority under the right filing conditions.

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