The recent dramatic growth of subsidiary finance companies has received surprisingly little attention in the literature. Sales finance subsidiaries originated shortly after World War I when automobile manufacturers first organized financing affiliates. Since then, producer-controlled financing has spread to most of the durable goods industries with an estimated 150 subsidiaries currently in operation. The purpose of this paper are to discuss the factors responsible for the growth of subsidiary finance companies and to show why it may be advantageous for a firm to establish this type of affiliate. A sales finance subsidiary, commonly known as a captive, is a company controlled by a non-financial corporation to provide financing services to itself, its dealers, its retail customers, or some combination of these. Captives may be divided into three groups indicative of the directness of the relationship between their activities and those of the parent. Sales finance subsidiaries serve as a marketing tool by providing credit to dealers and consumers, and they provide the parent with low cost financing and an attractive return on investment. The future of sales finance subsidiaries appears less promising than in the past.