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The Protective DOWC Program
A superior dealer owned warranty company
A dealer owned warranty company is a domestic warranty company owned by the dealer principal, with day-to-day operations handled by Protective. The owner(s) control the program branding and select which F&I products are offered in their stores. The dealer has total visibility into all investments and transactions. A Protective DOWC is taxed as an insurance company under federal tax laws, leading to significant tax efficiencies.
Simply put: It’s a superior participation program.
With a Protective DOWC (Dealer Owned Warranty Company) program, the dealer owns a warranty and service contract company without the challenges of administration. Through the benefit of lower fees and higher investment returns, a Protective DOWC program can capture the highest percentage of underwriting profit and investable assets in relation to other dealer participation programs, while our team handles the day-to-day operations.
Compare the Protective DOWC program to other F&I participation programs – and soon you’ll see there’s no comparison. Protective Asset Protection doesn’t just offer a DOWC program. We invented it. Using a consultative approach, our specialists work with you to understand the goals of your program and help design a solution to help maximize the potential of your F&I program.
Because a Protective DOWC is taxed as a P&C insurance company, shareholders realize federal tax efficiencies in addition to the even more important byproduct of enhancing the customer experience and creating customer loyalty:
- Potentially tax-free underwriting profit for a significant number of years, with proper planning and management
- Because a Protective DOWC is a U.S.-based company, there are no tax risks associated with overseas funds
- Because a Protective DOWC is taxed as an insurance company under federal tax laws, policy acquisition costs can be written off from the first year of operations
- Corporate dividends are treated as qualified dividends and are taxed at the capital gains rate
A Protective DOWC program also increases the bottom line because there is only one all-in administration fee. There are no ceding fees, annual maintenance fees, loss adjustment fees, claims fees, run-off fees, non-disclosed fees, or “just because” fees.
Similar to ownership of a dealership, a Protective DOWC program belongs to the shareholders. So all the decisions are made by the management team:
- Pick the products. Select the F&I products that work for the dealership and its customers, from service contracts and pre-paid maintenance plans to road hazard, theft deterrent, and paint and fabric protection, among others.
- Choose investments. Ownership or the management team decides how to invest money with a Protective DOWC program. And they don’t pay anyone an extra fee to invest it on their behalf.
- Invest money immediately. Money starts earning interest right away. As the administrator, we don’t hold onto it. No one touches the money but ownership.
In addition to decision-making authority, a Protective DOWC program is the only dealer participation structure that offers total financial transparency. Forget about reinsurance cession statements or quarterly reports. The management team has 24/7 access to the company’s financial information, including balance sheets and income statements.
That means there are no surprises. Only better income opportunities.
A Protective DOWC program puts the ownership/management team in the driver’s seat of a company that’s designed to work for them:
- Forecast better. With a complete understanding of the financials and on-demand reporting, they’re better able to forecast and plan.
- Improve profit margins. Other dealer participation programs can come with heavy administrative costs. There are no extra, hidden, or surprise fees with a Protective DOWC program.
- Boost the dealer's bottom line. A Protective DOWC program typically provides up to a 20% increase compared to other dealer participation programs.
- Increase capital acquisitions. As net worth grows, ownership can take out capital loans from a Protective DOWC program to invest in new dealerships or other growth projects.
What a Protective DOWC program is not is a dealer obligor program, and it does not have the negative accounting treatment of a dealer obligor program. The Protective DOWC program is a separate legal entity, backed by the financial strength of Protective Property & Casualty Insurance Company.
In five decades of managing DOWCs, not one Protective DOWC program has failed or caused loss to the Protective DOWC program shareholders.
Enjoy Having Control Over Your F&I Program
- Dealer reserves, consumer contract coverages, and marketing materials, as well as the company name, and state of incorporation are some of the options managed by DOWC ownership.
- A Protective DOWC program offers the best of both worlds with the tax deferral advantages of a non-controlled foreign corporation (NCFC) and the cash flow benefits of a controlled foreign corporation (CFC)
- Underwriting profits and investment income are retained solely by the dealer owned warranty company.
- With less restrictive investment allocations than traditional dealer participation programs, a Protective DOWC program offers the potential of a significantly higher risk-adjusted return on equity and assets.
- Flexibility to receive current income or long-term capital appreciation.
- The dealer is not the contractual obligor of service contracts.
Protective Asset Protection helps you with the set-up of your DOWC, and handles all of the day to day operations for the DOWC. This includes: Underwriting, Claims, Financial Statement Preparation and Reporting, and “Real time” Online Entry and Reporting.
