Captive lenders, banks and credit unions

The money for your car can come from three places, and they behave differently because they want different things.

A captive lender is the manufacturer's own finance arm. Its job is partly to make money on the loan and partly to sell cars, which is why subsidised rates and special offers come from here. When a manufacturer is pushing a model, the captive rate can be lower than anything a bank will do, sometimes dramatically. The catch is that the best rates are usually tied to specific models, specific terms and strong credit, and sometimes exclude other incentives.

A bank is lending as a business. The rate reflects your credit and the car, with no interest in moving particular metal.

A credit union is member-owned, which often shows up as lower rates and more willingness to look at a file individually rather than by score alone. Membership requirements are usually easier to meet than people assume.

The practical approach is to have an approval in hand before you discuss financing at the dealership. It costs little, it sets a benchmark, and it turns the finance conversation into a comparison rather than an offer. If the captive beats your approval, take the captive — that is a good outcome, and you only know it is good because you had something to compare it with.