# Captive Lender

Canonical URL: https://fundmyequipment.com/learn/glossary/captive-lender/
Last modified: 2026-05-29T19:39:17+00:00
Type: efin_glossary

## Summary

Finance arm owned by equipment manufacturer (e.g., Cat Financial, John Deere Financial).

## Content

Captive lender is a finance company owned by an equipment manufacturer that exists primarily to finance that manufacturer's equipment. Major captives include Caterpillar Financial Services, John Deere Financial, Volvo Financial Services, Komatsu Financial, Kenworth/Peterbilt Financial (PACCAR Financial), Daimler Truck Financial, and Bobcat Financial.
Why captive lenders exist
OEMs spawn captive finance arms for several reasons:

Sales velocity: integrated financing at the dealer accelerates equipment sales
Promotional flexibility: captives can offer 0% APR or below-market rates as sales incentives
Residual control: captives can set aggressive FMV-lease residuals because they can remarket through the OEM dealer network
Brand loyalty: captive financing reinforces brand commitment across multiple equipment purchases
Profit center: captive finance is itself a meaningful revenue source for major OEMs

Captive vs independent financing
Captive financing tends to be best for new equipment in promotional periods. Independent financing offers broader applicability (mixed-brand fleets, used equipment, sub-prime credit). See our captive vs bank comparison.
When captive wins

Promotional 0% or below-market APR offers on specific new equipment
Single-brand fleet with deep relationship to the OEM
Strong credit (captives tend to be prime-only)
OEM-certified pre-owned equipment

When independent wins

Mixed-brand fleet
Used equipment, especially older or private-party
Sub-prime credit profiles
Specific structures (TRAC, EFA) not offered by captive