Financing isn’t an accessory to the equipment sale. For most buyers, it is the sale — and the OEM that can answer the financing question at the point of sale wins deals the OEM that refers it out loses.
The U.S. equipment finance industry reached an estimated $1.34 trillion in 2023, with 82% of end-users financing their acquisitions, according to the Equipment Leasing & Finance Foundation’s 2024 Horizon Report. This is not a uniquely American pattern: roughly 40% of Canadian machinery and equipment purchases are financed through the asset-based finance industry, per the Canadian Finance & Leasing Association, and vendors originate around 35% of European lease distribution, according to Leaseurope. Manufacturers who can answer the financing question at the point of sale hold a structural advantage on every continent that tracks it.
What is captive finance?
A captive is a financing arm owned by, or operated on behalf of, an equipment manufacturer to fund its customers’ purchases. It uses deep knowledge of the manufacturer’s own equipment and residual values as underwriting leverage. That is why captives have historically posted the highest approval rates of any lender category — the Equipment Leasing & Finance Foundation found captives averaging in the 90% range across the period it reviewed, and recent ELFA CapEx Finance Index data shows captive approval rates still running above banks and independents.
Why can’t most mid-market OEMs just build one?
Building a true captive is a multi-year, capital-intensive undertaking. Roland Berger puts the threshold at roughly €75 million in annual financing volume before a standalone captive is economically justified, plus a leasing or banking license before an OEM can fund sales directly. The ELFA Foundation describes captives as standalone organizations requiring an expensive investment in resources and infrastructure most parent companies cannot replicate internally.
What does referring the deal to a bank cost?
Referring a buyer to an unaligned bank hands away control of approval speed, pricing, and the customer relationship — and stalls the sale in a queue the OEM cannot see into. The exact cost of that lag varies by lender and deal, so treat it directionally rather than as a fixed number: every additional day a financeable buyer waits on an outside lender is a day a competitor with an embedded financing answer can win the account.
McKinsey & Company found that buyers would purchase roughly four times as much directly from suppliers if financing were seamlessly available at checkout, and that embedded-finance volumes in Europe have grown three times faster than directly distributed lending over the past decade.
The third option: an outsourced, or “virtual,” captive
There is a middle path between building a regulated lender and referring deals out. In a virtual captive, a finance partner supplies the capital, underwriting infrastructure, and servicing, while the OEM’s brand stays in front of the customer. The National Equipment Finance Association describes it as an alliance with a third-party lessor that provides underwriting and capital while the manufacturer’s brand and sales relationship stay intact. The OEM keeps the brand, the customer data, and credit-policy say-so, while offloading the balance-sheet risk and back-office burden that make in-house captives so expensive.
What this looks like in practice
I built a captive program for Makino, a machine tool builder, starting in 2001, and spent 16 years building OEM captive and vendor programs before founding EFG in 2010. The recurring lesson: most mid-market manufacturers needed what a captive delivers, but had no realistic path to building one.
EFG runs the outsourced version — more than $750 million financed, a 92% approval rate, a 67% repeat-customer rate, and a $2.1 million average deal size, according to Equipment Finance Group.
Talk to EFG about whether an outsourced captive fits your customer base and equipment mix — before the next deal is lost to a competitor with an answer already in hand.
Sources
- Equipment Leasing & Finance Foundation, “2024 Horizon Report”
- Canadian Finance & Leasing Association, submission to the House of Commons Standing Committee on Finance
- Leaseurope, response to the European Banking Authority consultation on the Credit Risk Framework
- Equipment Leasing & Finance Foundation, “Captive Finance Firms in a Challenging Economy”
- Equipment Leasing & Finance Association, “CapEx Finance Index: November 2025”
- Roland Berger, “Captive Finance: A Multipurpose Strategic Tool for Manufacturers”
- McKinsey & Company, “Embedded Finance in Europe: Converging Platforms”
- National Equipment Finance Association, “Vendor Programs”
- Equipment Finance Group
