Perfection in Titled Vehicles: Will a lender’s notation of its lien on a certificate of title for a vehicle always perfect the lender’s security interest?
Answer: No. The general rule is that perfection in titled motor vehicles is achieved by registering the lender’s lien on the certificates of title. However, a significant exception is that if the vehicles are classified as “inventory” in the hands of the borrower, perfection is achieved solely by filing a UCC against the borrower covering such inventory. Vehicles held for sale or lease (or which are leased) by a borrower who is a vehicle dealer or leasing company would be classified as “inventory” under the Code and require a UCC filing for perfection. When dealing with vehicle inventory, registering a lender’s lien on the certificates of title is ineffective to perfect a security interest in the vehicles. Without the required UCC filing on a borrower’s vehicle inventory, the security interest is unperfected with regard to all creditors, including a bankruptcy trustee."
Credit:
Will a Notation of Lien on Vehicle Title Perfect Lender's Security Interest | First Corporate Solutions Blog
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