Understanding what a DOWC is, and how it functions, may be a direct route to maximizing profit for your dealership.

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You’ve likely seen the term DOWC, but you may not be entirely sure what it means. Here’s an overview you won’t want to miss because understanding what a DOWC is, and how it functions, may be a direct route to maximizing profit for your dealership — a critical consideration as unprecedented challenges continue to hit the industry from all sides. 

What is a DOWC? 

A dealer-owned warranty company (DOWC) is a unique structure that brings the tax advantages of the insurance industry to automotive F&I, creating a true wealth-building opportunity. By successfully establishing their own DOWC, dealers gain significant tax benefits and additional advantages that help optimize their F&I program. 

Under a DOWC structure, a dealer forms a separate C-corporation that controls the entire service contract transaction and all funds, including investments. This new entity becomes the provider of the contracts, providing an alternative to using a third party to hold reserves, and is treated as an insurance company for tax purposes. 

While it may seem a complicated endeavor, its benefits can be outlined in simple terms. Consider these key benefits:

  • The tax-deferred nature of a DOWC allows the dealer to take advantage of the same tax laws that insurance companies have been operating under for decades.
  • Essentially, the company has no taxable income for an extended period of time as a result of numerous expenses: administration and acquisition costs in the current tax year; net operating losses are carried forward.
  • With the correct administration, a DOWC formation is actually very easy to manage and, most importantly, prosper from.
Why a DOWC? 

Under a traditional service contract transaction model, a significant portion of the funds is held by a third party that controls them to its own benefit.

The DOWC structure proves there’s a better way:

  • When a DOWC serves as the provider, the dealer immediately has 100% control over their F&I program, including rates, coverages, marketing materials and the company name. In addition to increasing profit potential on F&I sales, the ability to customize their offerings means a dealer can build a portfolio of products that caters to a variety of vehicles and consumer needs.
  • Underwriting profits and investment income are retained solely by the dealer’s DOWC. Compare this to other structures where premiums may be exempt from tax, but investment income returns are taxed at normal corporate rates. 
  • A DOWC is not the same as an NCFC or CFC — it is not a foreign company at all. The structure allows dealers to stay onshore and benefit from domestic formation, as opposed to having to maintain foreign companies and being forced to invest with money managers preferred by an administrator. This can provide significant cash flow and a dealer can also borrow for virtually any purpose. 
Why a DOWC? The Better Question May Be, Why Not? 

It’s easy to understand why making the switch can seem intimidating. Some dealers may not understand what a DOWC is or how it functions. Or they may find it scary to shift gears after years in a more traditional reinsurance structure or limited participation with a guaranteed retro setup. But the time is now to explore the advantages and opportunities for wealth-enhancement that are readily available to all. 

Guidance for F&I Agent Success

New year, new you! We’ve all heard that before – but as ever-changing and ever-increasing challenges continue to hit the automotive industry, it is critical that every agent take a good look in the mirror and ask yourself, “Am I prepared?”

  • Prepared for the evolution of the industry as it shifts irrevocably away from internal combustion engines and brick-and-mortar dealerships?
  • Prepared for the evolution of F&I participation structures and products?
  • Prepared to become a subject matter expert able to bring solutions to dealers to retain and increase their business?

If the answer is not an absolutely solid yes to all these questions, you have some work to do. The key thing to address is your knowledge base. You’re busy, of course. We all are. Here’s an action plan you can start to implement today – and put yourself on the road to increased expertise, incomparable value as a dealer services consultant, and an earning curve that will keep going up year after year.

Ready, set, goal: Make an appointment with yourself to set concrete, measurable goals for 2022.

  • Write them in a notebook, draft a note on your phone, type up a Word document. However you choose to record your thoughts, it is critical to put pen to paper and get some solid ideas down. These will become your north star as the year progresses and challenges come at you from every angle.

Get smart: Feed your brain with new information every single day.

  • Set a daily reminder on your phone to stop, drop, and spend 10-15 minutes catching up on industry news. Read top headlines, stay current on automotive and finance & insurance trends, bookmark articles to explore more fully later, listen to podcasts or audiobooks while you’re driving to appointments. Strive to learn one new thing a day and put that knowledge in your arsenal to share with your clients.

Go pro: Professional development isn’t just for newbies.

  • Need to learn more about the different participation structures available to dealers? Need to improve your understanding of or get more up to date on tax compliance issues? There are plenty of resources available to you. Research trade associations, networking events, and online courses. Reach out directly to admins you trust and ask for guidance. Sharpening your subject matter expertise is a direct path to a win for everyone.

Be the change: This industry never stands still.

  • Dealers need solutions. If you’re not the one bringing them, someone else will step right in and do it for you. Start here: Identify your lowest-performing dealer and draft a few key recommendations to address their pain points. Strive to do this for every one of your clients eventually. The last thing you want is to have them hear about a winning solution from someone other than you.

Build resilience: It’s the most important muscle to develop.

  • If you’ve been in this industry for more than a year, you have already been through some incredible challenges. Did you just survive or did you thrive? Be ready to respond to any situation that arises with a flexible approach, a willingness to listen, the guts to take risks, and an attitude of gratitude every single day.

Shine online: Why waste the opportunity to connect with ease?

  • Amp up your social media presence by updating your LinkedIn profile, following industry thought leaders, expanding your network, and actively engaging with your connections. Not in the habit of posting regularly? Shoot for creating a new post, or at least sharing some content, once a week as a starting point. Demonstrating your smarts is never a waste of time.

Mirror success: There are incredible lessons to be learned from giants in every industry.

  • Too young to remember Jack Welch or Lee Iacocca? How about Steve Jobs? Or current disruptors like Bezos and Musk? Look back at the greats and keep current with today’s headline-makers. Read up on those who inspire you and pinpoint the lessons you can make actionable in your own work and life.

The key to unleashing your inner Super Agent is taking ownership of your success by putting in the work. Relying on surface knowledge, and repeating it back to others without a real understanding of what lies beneath, is a way to skate by that ultimately won’t get you to your real goals.

Once you become a true subject matter expert on service contract revenue opportunities, you can serve as much more than a dime-a-dozen sales agent. Instead, you can become a powerful wealth consultant to your dealer clients and help them successfully navigate the inevitable challenges that lie in wait for us all.


Michael LaMotta is CEO of DOWC®, among the fastest-growing service contract providers and administrators in the U.S. A 2021 Dealers’ Choice Diamond Award winner, DOWC offers customizable F&I products and expertise in compliance, as well as a full suite of technology designed to optimize productivity and expedite service contract claims adjustments, processing, and reporting. 

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Insurance regulators are turning their attention to service contracts and raising concerns about how they are regulated and whether these products should be categorized as insurance.

Recent changes in the political landscape have landed us in an era of increased scrutiny of the F&I industry.

Early concerns about the Consumer Financial Protection Bureau overstepping its regulatory authority are somewhat curbed at this point, but a new challenge is looming. Insurance regulators are turning their attention to service contracts and, once again, raising concerns about how they are regulated and whether consideration should be given to recategorizing these products as insurance.

The National Council of Insurance Legislators Property and Casualty committee convened this summer and explored the topic of service contracts. Understanding the general differences between warranties, service contracts and insurance was discussed, as was the size of the warranty market. A point was raised about the importance of claims and loss history, followed by a state representative’s remark that states should perhaps be collecting this data on service contracts.

General counsel and COO of DOWC, a service contract provider and administrator

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Inventory shortages are projected to continue through the end of the year as production schedules take the hit from ongoing computer chip scarcity. Dealers are all fighting the same battle now, forcing owners to continue to reassess their practices, streamline their operations, and retool their capabilities to find their way through. F&I claims management is one of the more important practices to examine, according to experts in claims administration.

“I was a dealer,” explains Michael LaMotta, CEO & Founder of DOWC®, a top U.S. service contract provider and administrator. “I know exactly what this process looks like from the inside out. But what I see now, from the other side, is very few dealers who truly play an active role in managing one of the largest expenses a reinsurance company or warranty company experiences: claims.”

Taking steps to improve that process is one of the most direct routes to profit growth a warranty company owner can take. “The single best way to manage profitability of any business is to control its expenses,” LaMotta says, “and car dealers are generally great at that. But in too many cases, dealers and their staff have no idea what is being approved on a day-to-day basis by their service contract administrators.”

One area where things may go wrong is the misuse of service contract benefits. It is not unusual, for example, for liberties to be taken with covered items by service writers who earn commission per service written. Dealers can take firmer control of the claims process and reduce costs by:

  • Minimizing the amount of fraud that may result from practices involving pay plans, commission structures, and objectives/goals set by service departments.
  • Controlling and limiting the number of unnecessary claims.
  • Training service departments to properly manage claims with the goal of reducing expenses (i.e., purchasing reconditioned wheels, rather than new, thereby a reducing the cost of a tire & wheel claim by 50% or more).

Another way to decrease expenses is by limiting “transient” claims – any repair that takes place outside the original selling dealership that issued the service contract. As LaMotta explains, “Allowing a transient claim is exactly the same as walking into your competitors’ offices and moving money from your pocket right into theirs.”

Dealers who take an active role in limiting transient claims benefit in several ways:

  • Keeping costs down by eliminating abuse.
  • In-house repairs performed at inherently lower rates than elsewhere.
  • Transferring money from left pocket to right instead of to the competitor: If a claim must be paid or a repair performed, the dealer wins by paying themselves to do it.

This all begs the question, what’s the true cost of a claim? The true cost of a repair (assuming the repair is performed in-house) is the flat rate paid to the technician and the actual cost of the part. Most dealers experience flat rate averages between $25 – $40 depending on the experience of the technician performing the repair. Most door rates for labor can fetch upwards of $200 or more in some metro areas. This puts labor profits in the 400 – 600% range. Parts markups are somewhere between 30 – 60% depending on the type of part. When the repair is performed outside of the selling dealer (transient), the true cost of the claim is whatever total amount was approved by the administrator.

A good question for dealers to ask themselves is “What percentage of approved claims are being paid to my competitors?” If the answer isn’t readily available, this is an excellent place to start. Dealers should have access to that data point and examine it monthly to keep a close eye on transient claims.

This is all the more important for dealers who participate through ownership of a warranty or reinsurance company: reducing or eliminating transient claims is critical to increasing profitability. For those who participate, as well as those who don’t, this can be achieved through well-crafted service contracts that include a tie-back to your dealership, carefully training service writers and service departments in best practices, and, most importantly, taking an active role in managing claims in conjunction with an administrator you trust.

As a full-service finance and insurance product provider, DOWC has a direct view into the negative impact transient claims and overall poor claims management have across the industry. It strives to anchor its dealer services with transparent reporting that explicitly quantifies transient claim rates and works diligently to reduce them. DOWC’s offers vehicle service contracts, GAP coverage, and a range of specialized products including protection for tire and wheel, technology systems, theft, total loss, as well as pre-paid maintenance packages, and more. Each of their F&I products is customizable and offers a dealer tie-back for service and repairs. In addition, DOWC assists dealers in establishing warranty companies and reinsurance companies, provides expert compliance guidance, and utilizes advanced selling platforms to drive dealer success.

Advanced technology has revolutionized vehicle safety, systems, and entertainment. With 360Shield Ceramic Coating, vehicle exteriors now reach this elevated level, benefiting from maximum protection thanks to the latest in nano-ceramic technology.

Ceramic coating paint protection products provide superior, long-lasting surfacing that forms a permanent bond. Our 360Shield Ceramic Coating contains a unique molecular coupling agent that chemically bonds to the clear coat surface. Fusing at the molecular level, it creates a hydrophobic coating delivering an amazing gloss and ultimate protection to all automotive exterior surfaces against contaminants and common environmental damages.

Benefits include:

  • Automotive Body Protection
  • Glass Protection
  • Chrome Protection
  • Plastic Molding Protection
  • Rubber Trim Protection
  • Hydrophobic Finish
  • UV Blocker
  • Super Shine Enhancement
  • Exceptional Durability

360Shield Ceramic Coating provides protection to surfaces left unprotected by traditional paint sealants. Extremely durable and water-resistant, ceramic coating creates a barrier that scares off water droplets (the “hydrophobic” effect), causing them to bead up and roll off the vehicle rather than sticking to surfaces.

This professional coating delivers an amazing gloss and provides maximum protection against:

  • UV Rays
  • Acid Rain
  • Bird Droppings
  • Industrial Fallout
  • Bugs
  • Grime
  • Tree Sap
  • Other Surface Contaminants

A professionally applied ceramic coating bonds with paint and will not wash away. The sleek, high-gloss finish prevents dust buildup, repels water, and easily wipes clean. Extremely durable, ceramic coating can last several years, comparing favorably to paint sealant that may last only a matter of months.

DOWC has been awarded a Top Workplaces 2021 honor by NJ.com Top Workplaces. We are a family-run and family-oriented company, and we cherish every member of our team as one of our own. This recognition means so much to us as it reflects honest feedback and constructive response from our staff.

DOWC was included for the first time in this year’s program, conducted by NJ.com in conjunction with employee engagement technology company Energage LLC. Public and private companies, nonprofit organizations, and government employers throughout the state were eligible for nomination. Data from anonymous employee surveys provided insight on criteria including culture, leadership, and connection. Survey results are compared to the Top Workplaces benchmarks built on more than 15 years of data to determine each industry’s best in class.

As a relatively young organization, it is meaningful to us to achieve this honor. As we have strived to build a strong business, we have also dedicated ourselves to creating a great culture. At DOWC, our corporate and personal values are deeply connected: Integrity is paramount, honesty is prized, creativity is encouraged, and growth is facilitated through an unwavering belief in each person’s capacity for excellence. We love what we do, we enjoy each other’s company, and we are delighted to see our positive efforts reflected in this Top Workplaces recognition.

February 18, 2021 (RINGWOOD, NJ) — Dealer Owned Warranty Company (DOWC®), a leading provider and administrator of F&I products and services, is proud to introduce a high-value identity protection product that uses innovative technology to offer multiple layers of protection, including best-in-class fraud prevention and remediation services.

ID Theft Protection coverage offers a comprehensive suite of high-value protective services and benefits, including dark web and financial monitoring and stolen funds reimbursement to restore customers’ confidence and safety. Paired with 24/7 customer service and thorough coverage, these benefits make ID Theft Protection an outstanding value solution for the protection of your sensitive and vulnerable digital lives.

Each of us unknowingly risks exposure of our personal information online daily. As DOWC Founder & CEO Michael LaMotta explains, “Every minute we work, shop, and socialize online, we run the risk of identity theft or fraud that is often so sophisticated we are not even aware it has happened.” With an average use of four hours spent on the internet each day, those risks are substantial for users of all ages who access the web through cell phones, tablets, laptops, and other smart devices.

“Our goal in creating this ID Theft Protection product,” LaMotta explains, “is to provide affordable access to protection for anyone who seeks peace of mind through robust protection and real, tangible remedy should identity theft or fraud occur.” That recourse includes a unique suite of protective services and benefits that include fully managed restoration, stolen funds reimbursement, single credit bureau monitoring, and careful surveillance of hard-to-find “dark” websites and forums where information is traded and sold by identity thieves.

Provided by DOWC, one of the nation’s leading providers and administrators of F&I products and services, ID Theft Protection expands the opportunity for dealerships to offer protection services to their valued customers, separately or in addition to their vehicle protection needs. As identity theft and identity fraud threats continue to rise, and the costs of cybercrime skyrocket annually, this is a timely and high-value product addition to DOWC’s expansive service contract and financial protection offerings.

About DOWC

DOWC® is among the fastest-growing service contract providers and administrators in the United States. DOWC offers customizable F&I products, expertise in compliance, and a full suite of technology designed to optimize productivity and expedite claims adjustments, processing, and reporting. For more information about DOWC, visit dowc.com, call 201-777-1000, or email support@dowc.com.

Exploring the hidden value of your existing customer data                                          

The traditional dealership model is shifting in dramatic ways. Consider Tesla’s shakeup to the time-honored showroom selling process, the pandemic shutdowns forcing a hard pivot to digital retailing, the overall consumer shift toward self-service and on-demand solutions. The good news is with change comes opportunity.  

There’s no need to stand still and watch revenue dwindle. In fact, that isn’t even an option. This is the moment to open our eyes, and our minds, to new ways of doing business. As our industry continues its somewhat lagging advance into the digital age, let’s take a close look at a revenue opportunity that is sitting right at our fingertips, but is often overlooked by dealers, F&I managers, and sales teams: customer data. 

That data – such as a customer’s name, address, email, phone number, VIN, and purchase price – holds incredible value. It provides a treasure trove of insight into that individual as a consumer, and also creates an opportunity for direct communication with them for continued engagement. With attentive management of this data, a dealership has the ability to enter the incredibly lucrative aftermarket space and gain control over revenue streams that are otherwise walking out the door with customers who decline to buy a service contract at the point of sale. 

Some might construe the use of customer data as a potential violation of customers’ privacy, akin to selling off their information to the highest bidders. That is not what we are in any way advocating. There is a significant difference between selling customer data and monetizing it through your own marketing efforts.  

The fact, which may be a shock to many, is that there is a vast industry of third-party entities that are already making use of the very data dealerships collect. On a daily basis, we are handing this information over – to the DMV, for example – and setting off a chain reaction in which that customer information is used by others for financial gain. That revenue stream, built on data that originates from a dealer’s DMS, excludes that dealer entirely. When dealers supply required customer data following a sale, they are unknowingly feeding that revenue source and, in turn, the profits generated for the entities that purchase that data. 

According to a nationwide research report, U.S. marketers and other users spent more than $11 billion on third-party audience data in 2019. The companies that buy information include address-registry and consumer-report publications, banks, auto parts suppliers, insurers, car-rental agencies, and car dealers. In some states, buyers may also include commercial data brokers, collection agencies, private billing companies, security companies, targeted advertising firms, and bulk marketers. 

One example of how customer data may be used is by competitors who employ marketing tactics to invade a dealer’s PMA to sell vehicles and extended service contracts. The obvious question to pose in response to these facts is: Can dealers take back control of this revenue opportunity without harming their customer relationships or risking privacy violations? The answer is yes. 

Examine your internal resources carefully. If you have the bandwidth, and the knowledgeable personnel, to devote some targeted effort toward direct marketing, outline a strategic plan for outreach to customers who can still benefit from purchasing a service contract or other F&I product. In tandem, you’ll need to establish a process for executing aftermarket sales for these prospects.  

Another option, should your resources be more limited in this regard, is to work with a reputable partner that can generate a branded marketing program on your behalf. With a white-labeled marketing program, you unlock the opportunity to offer existing customers access to valuable vehicle protection and bring business right back into your service center, closing the loop on your positive customer relationship.  

Selling data is exactly that: purposely providing customer information to a third party in exchange for financial compensation. Monetizing data differs in that you are making use of customer information for the purpose of direct marketing to your own customers, not sharing or exposing customer information to any third party for its own use. In the case of partnering with a service provider, your customer data is used only with your permission and only for the purposes of marketing to those customers under your brand name. Your sales opportunities are extended without added burden to your BDC or F&I department. And as the pipeline for post-sale VSCs replenishes continually (as factory warranties expire)it’s easy to see the impressive potential in this model. 

With F&I being the key source of revenue in building dealer wealth and ensuring resilience during these turbulent times, the ability to leverage your data through internal efforts or reliable dealer-branded automated marketing programs is crucial. Let 2021 be the year you take big steps forward into the future of auto retailing that’s already here. Tapping into the value of your own data is an excellent place to start 


Michael LaMotta is CEO of Dealer Owned Warranty Company. He founded DOWC® with lessons learned from almost 30 years of automotive experience, many of which spent as a car dealer and nearly a decade spent on F&I administration. DOWC is one of the fastest-growing service contract providers and administrators in the United States. DOWC offers customizable F&I products and expertise in compliance, as well as a full suite of technology designed to optimize productivity and expedite claims adjustments, processing, and reporting 

We are delighted to announce the recent promotion of Danielle Diodato to Director of Compliance. As of January 1, Danielle is broadening the scope of her focus, in addition to her role as Associate General Counsel, to fuel our team’s ability to ensure compliance at all levels across the company’s holdings.


Danielle brings a unique skill set to DOWC and Provider Management Services, merging a depth of experience in managing all aspects of litigation and transactional work with expertise in compliance and regulation. Expanding her role reflects our deep appreciation for Danielle’s integral contribution to our operational excellence as well as our core commitment to ensuring compliance with a focus on both supporting customer operations and safeguarding customer reputations.

The new year is approaching, and with it the changeover to a new federal administration. Re-examination of the legal landscape and related tax implications is in order, including both fundamental automotive regulations as well as finance and insurance laws.

The year 2020 was unlike any in modern history. Disruptions to social, economic, and legal norms, caused by the COVID-19 pandemic, have shaken many institutions to the core. Within the automotive industry, challenges were met with resilience and an impressive rebound despite ongoing supply disruption, inventory shortages, and retail restrictions.

In an era of fluctuating interest rates, continued tariffs, trade war ramifications such as the unresolved dispute with China, and ever-changing statutory requirements, automotive dealers have a great deal to contend with in addition to keeping sales moving. Changes in the automotive space and related industries, combined with increased regulatory scrutiny and continued developments in trade and M&A, forced dealers to face several unique challenges this year, particularly as online retailing becomes dominant. As the new year approaches, a re-examination of the legal landscape and related tax implications is in order.

Review and analysis of not only fundamental automotive regulations but also finance and insurance laws are highly recommended. It is vital to keep these key points in mind:

  • While various overarching federal laws govern aspects of the sale of F&I products, most products are subject to the statutory framework in place in each state.
  • Regulators and policymakers seek to ensure a competitive and fair market that is first and foremost protective of consumers. As a result, disclosure and financial security requirements are ripe for action by the legislature and may be pitfalls for dealers who are unaware of changes.
  • Dealers should leverage the many resources available to them to ensure continued compliance. An F&I administrator with regulatory and tax counsel should be able to provide guidance; first-hand education is available through many dealer associations. 

As we enter 2021, conscientious risk and wealth management are also essential for the success of dealers. Familiarity with the broader tax changes affecting the industry, particularly with the incoming Biden administration that may enact policies quite different to those currently in place, will allow for informed decisions about participation in the F&I segment of the business.

In recent years, the Federal Tax Cuts and Jobs Act prompted many car dealers to consider the formation of a domestic c-corporation (a dealer-owned warranty company) to serve as the provider of their F&I products as a means of shifting away from the uncertain future tax implications of operating as a non-controlled foreign corporation and insulating themselves from newly mandated disclosures required from controlled foreign corporation owners. The tax structure and benefits afforded a dealer-owned warranty company effectively meet the wealth-building needs of dealers while satisfying regulatory compliance concerns. 

Dealers who have not explored or transitioned to this structure over the last 12 months will find it beneficial to do so prior to year-end to ensure enough time for discussion of tax benefits, formation, and registration of the entity, and to ensure all regulatory requirements are met. In fact, more than 30 tax breaks that Congress has permitted to regularly expire and then renew are currently set to expire at the end of 2020, including individual, business, and energy tax breaks. There is great profit potential and risk mitigation opportunity with a dealer-owned warranty company structure. 

That said, the dealer is the true owner and operator of the company and is responsible for compliance with all applicable laws as the provider of its F&I products. As a result, it is recommended that dealers work with a trusted DOWC administrator who has knowledgeable legal and tax departments to ensure the most prudent and effective administration as allowable by law, and protection of the benefits achieved through the structure.


Edvie Castro, General Counsel of Dealer Owned Warranty Company, is a dynamic leader in the automotive industry, operationalizing the DOWC® vision and driving the business forward daily. Her handling of regulatory and compliance matters earned her a nomination from NJ Biz for 2020 General Counsel of the Year. DOWC is among the fastest-growing service contract providers and administrators in the U.S., offering customizable F&I products and expertise in compliance as well as a full suite of technology designed to optimize productivity and expedite claims adjustments, processing, and reporting.