What is a captive financing company?
A captive finance company is a wholly-owned subsidiary of an automaker or retailer that provides loans and other financial services to the customers of those companies. Captive finance companies provide store credit cards for retailers and full-scale banking, including multi-year auto loans.
What’s a captive lender?
What Is a Captive Lender? Captive lenders are the lending divisions of automakers, like GM Financial for General Motors’ brands and Kia Motors Finance for Kia. These third-party lenders only work with people that are financing a car at a franchised dealer.
What is captive NBFC?
A captive NBFC is defined as one which holds receivables generated on account of its parents activities at least to the extent of 90% of its total assets, net of intangible assets. The business franchise of such captives is inextricably linked to the parent’s fortunes.
What is captive banking?
Captive bank is an institution intended to provide services to a promoter and his/her associates. Usually, a captive bank is wholly owned subsidiary of a multinational group of companies. The purpose of a captive bank is to provide banking service to the group or to the parent organization.
Is Honda a captive lender?
A captive auto lender is a finance subsidiary set up solely to offer auto loans to buyers of a particular dealership or car company. For example, Honda, Ford, and GM all have captive lenders providing loans to customers.
What is captive manufacturing?
A captive unit is a business unit of a company functioning offshore as an entity of its own while retaining the work and close operational tie ups within the parent company.
What are the disadvantages of captive insurance?
The Disadvantages of Captive Insurance
- Raising Capital. Because the entity is essentially self-insured, it needs to raise a substantial amount of capital to keep in reserve to pay for claims.
- Quality of Service.
- No Tax Benefits.
- Inability to Spread Risk.
- Additional Management.
- Difficulty of Entrance and Exit.
Is captive insurance a good idea?
Captive insurance entities offer a vehicle to self-insure that can be especially cost- and tax-effective. Some professionals recommend captive insurance as the greatest thing since sliced bread. Others are wary of getting their clients involved in creating a captive, knowing that the IRS closely scrutinizes them.
Why do manufacturers offer their own finance?
Offering financing creates value for your customers by saving them money, getting them better terms and helping them stay current. One way they save money is through the manufacturer’s knowledge of the equipment and ability to resell pre-owned equipment.
What does captive finance company mean?
A captive finance company is a subsidiary company established for the purpose of providing credit to customers of the parent company. This is designed to facilitate financing for consumers making big purchases like appliances and vehicles. Captive finance companies are either owned or controlled by…
What is a captive leasing company?
A captive lease company is a leasing company operated by a financial affiliate or subsidiary of the vehicle manufacturer. For example, General Motors has a finance company known as GMAC (General Motors Acceptance Corp).
What is captive insurance concept?
Captive insurance is insurance or reinsurance provided by a company that is formed primarily to cover the assets and risks of its parent company or companies. It is essentially an “in-house” insurance company with a limited purpose and is not available to the general public.
What is captive leasing?
A captive lease is a lease program offered by finance companies that are affiliated with certain car manufacturers. Ford Credit, BMW Finance and American Honda Finance are examples of car companies that provide captive leases through their own finance companies.