Correct
the best choice for storing configuration settings that need to be packaged and deployed with a managed package (like an AppExchange app). It allows you to define metadata types that can store configuration data and package them with default values (best practice settings) that can be included in the app. Custom metadata records can be updated post-installation, allowing for flexibility when different Salesforce instances require different configurations.

Although custom settings are used for configuration, they are less ideal in this case because they don't support packaging default values for different instances. They are more suitable for user-specific or org-specific settings that aren't meant for packaging and deployment.