Legal Definitions - purchase-money interest

Definition: A purchase-money interest is a type of security interest that arises when a seller of goods or property finances the purchase for the buyer. The seller retains a security interest in the goods or property until the buyer pays off the purchase price.

Example: John wants to buy a car from Jane, but he doesn't have enough money to pay for it upfront. Jane agrees to finance the purchase and retains a purchase-money interest in the car until John pays off the loan. If John defaults on the loan, Jane can repossess the car.

Explanation: In this example, Jane is the seller and John is the buyer. Jane is financing the purchase of the car, and she retains a purchase-money interest in the car until John pays off the loan. This means that Jane has a security interest in the car, which gives her the right to repossess it if John defaults on the loan.