The £340 million deal means Rover and HBoS take on the finance contracts of some 58,000 MG, Rover and Mini vehicles which were taken out under BMW's ownership of the brands.
Christened MGR Capital, the joint venture comprises HBoS and the Phoenix Partnership, which consists of MG Rover directors. The new finance company will manage the financial side of the business, while MG Rover Group will look after the disposal of end of contract vehicles.
HBoS, already finances a combined fleet of some 145,000 vehicles through its ownership of Lex Vehicle Leasing, Godfrey Davis (Contract Hire) and Bank of Scotland Vehicle Management.
MG Rover chief executive Kevin Howe said: 'This puts us in more control of the second hand value of MG and Rover cars, which is a significant benefit to our business and our customers. It also creates many new marketing opportunities for the future.'
Ford acquired the Land Rover assets of Rover Financial Services in a separate deal completed last month.