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Wealth Building

In a highly-competitive environment where profit, as a percentage of sales, is slim, where capital requirements are so huge, and where litigious challenges are so great, dealers need to take advantage of every opportunity to create wealth without excessive risk or threat of legal peril.

Historically, dealers banked on the Blue Sky of their business and the underlying real estate as keys to their long-term wealth development. However, the ever-changing franchise landscape and complexity of the business model have made these wealth creation cornerstones much less reliable and insufficient.

In addition to Blue Sky and Real Estate, incremental approaches to wealth development are vital. That is the development of non-dealership assets, such as Dealer Owned Warranty Companies (DOWCs), reinsurance, and retro’s. Even though dealers have been participating in underwriting profits of the products utilizing this opportunity and, frankly, leaving money on the table, ADG’s experience will help you analyze programs and make choices that are best for you and your customers.

To drive a truly extraordinary return on investment typically takes gains on efficiencies within an existing business model that previously were not available. We accomplish just that through the utilization of DOWCs and/or reinsurance. As a dealer, you will experience new efficiencies and ultimately an extraordinary ROI. This will allow you to maximize your existing business while developing an entirely new asset outside of the dealership.

Even though dealers have been participating in the underwriting profits of the products they sell for more than 30 years, we’ve found that most haven’t given a tremendous amount of effort to maximizing the available programs. Initially, programs may appear complex with different structures, insurance carriers and tax implications. ADG can help you navigate these programs make sure the choices you make are best for your dealership and business strategy.  
Types of Dealer Income Participations:

  • DOWC’s:  Allows 100% control over your F&I program!
    - Rates, coverage’s, marketing materials, as well as the company name, are at the discretion of the dealer.
    - Underwriting and investment income retained solely by the DOWC.
    - Provides significant cash flow (dealer can even borrow excess cash for virtually any purpose).
    - NO CLAIMS HEAT – dealer has override authorization on all claims.
    - Contractual Liability Policy limits potential exposure to losses.
    - Tax-deferred nature of the DOWC allows the dealer to use it as a wealth-building tool.
    - Benefits of a DOWC far outpace other programs available to the automotive marketplace.
  • Reinsurance -  For dealers who want to earn the highest return available from underwriting profit and investment income, owning a reinsurance company can have additional benefits such as preferential tax treatment, estate planning and key employee retention.
  • Retrospective -  With no setup costs, no annual expenses to consider, and no tax implications involved, retros offer the easiest mechanism for a dealer to participate in the underwriting profit and corresponding investment income of the products they sell.

    NOTE: Most F&I products do play a role in wealth development. However, many programs are subject to cost and income sharing provisions that unnecessarily inhibit a dealer’s income. ADG’s experience will help you analyze programs and make choices that are best for you and your customers.

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