A dealer owned Warranty Company, or DOWC, is a one-of-a-kind organization that applies the insurance industry tax incentives to automotive F&I, providing dealerships with a personal wealth prospect. They assist dealers in informing their DOWC in order to receive considerable tax benefits and other benefits that will help them optimize their F&I programme. While it may be a tough challenge, the advantages can be explained easily. And with proper management, a dealer owned Warranty Company structure is rather simple to administer and, more significantly, to profit from.
Consider These Following Significant Advantages Car Warranty Company:
- When a dealer-owned warranty company is chosen as the supplier, the dealer gains complete management of their F&I programme. The dealer has absolute control over deciding the rates, marketing content, coverage’s, insurances, and the company name.
- The flexibility of a dealer to customize and modify their personal F&I solutions indicates that they may develop a portfolio of F&I goods that appeal to a wide array of vehicles, in addition to enhancing profit potential on F&I sales.
- The dealer can create coverage’s that meet or surpass the company’s extended warranties service contracts.
- The most sophisticated and certainly most important aspect of a DOWC is that it may be used as a wealth-building instrument because it is tax-deferred.
- While there are strict financial mechanisms in effect, as well as the damage ratios for both imported and domestic vehicles are also fairly consistent and, thus, predictable. The damage ratio of any other dealer has no bearing on yours.
- All cash, including reserves and investments, is under the dealer owned warranty company and its complete control.
- When a client no longer struggles to get a claim reimbursed, customer happiness can skyrocket and increase.
- National auto repair networks and dealerships are used to fulfill claim repairs.
- The claims administrator seems to be in charge of all and keeps the necessary records.
- Another significant benefit is that underwriting earnings and income from investments are exclusively maintained by the DOWC, in contrast to other such alternative structures in which premium may be tax-free, but capital gains and dividends returns are taxed at normal corporate tax rates.
- Instead of retaining foreign firms, a DOWC structure allows dealers to stay on-shore and profit from domestic development. This implies that dealers can create bank and investment accounts at any organization they want rather than being forced to engage with the claim administrator’s recommended financial advisers. This can produce a lot of cash flow, and a trader can borrow for almost anything.
The dealer registers a distinct c-corporation for the primary intention of underwriting service contracts in a dealer owned warranty company. This new business has become the contract provider, eliminating the need for a third-party administrator to manage reserves. In addition, switching to a dealer-owned warranty firm offers considerable tax benefits and other perks that assist them in maximizing their F&I program.