Captive Financing.
In plain English
Captive financing is a car loan or lease made through a lender that belongs to the vehicle's manufacturer, rather than through your bank or credit union. These captive lenders (names like Ford Credit, GM Financial, Toyota Financial Services, and Honda Financial Services) exist mainly to help the parent company sell more cars. Because of that, they are usually the source of promotional deals like 0% APR or cash rebates. They compete against outside lenders for your loan, so their rate is not automatically the best one available.
01Why it matters
The captive lender controls the headline promo deals, but the dealer earns money when you finance in-house, so the offered rate may still be beatable by a credit union you bring yourself.
02The math, step by step
You buy a new SUV. The dealer offers financing through the brand's captive lender at a promotional rate, while your credit union pre-approved you separately. You compare both APRs and total interest, then pick the cheaper one. The captive deal might win because of a manufacturer subsidy, or your credit union might win on a standard rate.
03What this is NOT
A captive lender is owned by the carmaker and exists to sell vehicles, not by a separate bank. Its goal is moving cars, so its rate is a sales tool, not always the lowest financing you can find.
04Receipts
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Plain-English answers from our glossary. Receipts included. Never advice.
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