Captive finance at a crossroads: moving to a hybrid approach

Summary

At the AFC Leaders’ Summit Europe in Amsterdam in May, a distinguished panel gathered to explore the shifting landscape of captive finance. Moderated by Richard O’Donohue, the discussion brought together leaders from Cisco Systems Capital, Lenovo Global Financial Services, Sandvik Financial Services, FIS, and Palo Alto Financial Services to reflect on the role of partnerships, the pressure of regulation, and the transformative impact of technology and culture on vendor finance models.

Why do OEMs establish captives in the first place? Chantal Voncken of Cisco Systems Capital recalled Cisco’s decision in the late 1990s to move away from a fully outsourced model. “You don’t really see the conflicting interests when you’re outsourced until you look at it closely,” she explained. “As a captive, you’re established because you want to support and accelerate sales. Our purpose was to create that value add for Cisco and make sure our customers had one consistent experience. Over time, we’ve evolved from financing and leasing into full lifecycle solutions, so we can enable the whole story from start to finish.”

For Lenovo, the decision to build a finance capability came later. “We were historically a channel-driven, product-focused company,” said Jon Souch, General Manager for EMEA at Lenovo Global Financial Services. “Having a finance captive wasn’t part of our strategy. But as the market shifted to as-a-service, we repositioned as a solutions company. Every one of those solutions needs to be delivered as-a-service under our TrueScale banner. That’s why we’ve taken a hybrid approach – about a third of our business on balance sheet, the rest through dedicated funders. It gives us the best of both worlds: agility and innovation from our own capabilities, and scale and coverage from partners.”

The perspective from outside the technology sector was provided by Björn van den Berg, Global Director at Sandvik Financial Services and chair of the Captives Forum. “Running a captive in a regulated environment is becoming increasingly expensive,” he said. “If you haven’t made the step up to become a true solution provider, your parent might start questioning whether the captive is really needed. At Sandvik, we deliberately decided not to get regulated six years ago, which spares us that debate internally. But across the industry, it’s a live issue.”

Technology was another recurring theme. Murad Baig, who leads global equipment and auto finance strategy at FIS, highlighted the burden of legacy systems. “For many captives, upgrading technology is like having a heart bypass,” he said. “It’s not really about the technology; it’s cultural. Leaders don’t want this to be the last thing they do if it goes badly. Meanwhile, newer players with clean-sheet platforms are moving much faster. But if captives don’t address technical debt, they’ll lose on time-to-market, which is the one thing CEOs really judge them on.”

“We started with an RFP, selected two partners, and rolled out to 10 countries in 12 months. Within three years, we were at 36 countries with over $2 billion funded and more than 20 percent attach rate. We could never have done that without partners. But for the largest deals -$50 million transactions at quarter-end – we need the in-house capability. Banks simply can’t react quickly enough.”

Quarter-end dynamics became a lively part of the discussion. “These deals pop up out of nowhere,” said Souch. “You can’t expect an external funder to pick up the phone at nine o’clock at night on the last day of the quarter and drive it through their governance. That’s where the captive proves its value to the parent, by delivering when it really matters.”

Voncken added that for Cisco, years of integration work meant most large deals are now visible well before the quarter closes, but the captive’s role in accelerating sales remains under constant scrutiny. “Every day we have to prove our value,” she said. “We’re not core business, so if we don’t show impact, we can be questioned.”

The discussion also touched on external pressures, such as the “Amazonification” of the customer experience. When asked whether Amazon might one day disrupt OEM captives, Souch responded: “Amazon has been trying to disrupt us for years. But a lot of customers found public cloud expensive and risky, and they’ve moved back toward dedicated platforms. That’s where vendors like us can deliver the same experience as Amazon, but with governance and cost efficiency. Competition pushes us forward, but there will always be a place for both.”

When the panel turned to what makes partnerships succeed – or fail – the answers converged around people, culture, and sponsorship. “Trust is critical, but really it comes down to people,” said Voncken. “If you have the right person in place, you can build a great business. But if that person leaves and the successor doesn’t have the same vendor DNA, the whole partnership can fall apart.”

Souch agreed, stressing the need for genuine commitment. “We need partners who invest – who dedicate resource, who align to our culture, and ultimately become an extension of our salesforce. If they’re just chasing easy wins, it won’t work.”

Llewellyn pointed to executive sponsorship as a decisive factor. “We’ve been lucky to have Nikesh Arora and our head of sales backing us. Without that, you can build a program that no one uses. Beyond that, partner selection comes down to speed, cultural fit, coverage, and strong governance. And to scale quickly, rebate and subsidy programs that remove friction for customers and sales are key.”

Van den Berg added a note of caution. “Sponsorship works both ways,” he said. “You need support to grow the captive, but you also need support to survive the pressure when you say no to risky transactions. The business might see it as losing a sale, but if the captive takes on too much risk, it could undermine the whole model.”

By the end of the session, a consensus had emerged. Captives remain a powerful lever for OEMs to accelerate sales and deepen customer relationships, but the environment is changing. Hybrid models that blend captive funding with external partnerships are becoming the standard. Success will depend less on balance sheets and more on culture, technology, and executive alignment. As Murad Baig put it: “It’s always about outcomes. Captives and partners have to align not only on business strategy but on the outcomes customers want. That’s the only way to keep these partnerships alive.”

Watch the captive finance panel session from the AFC Leaders’ Summit Europe 2025 in full here.