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.

 

Fast-growing F&I service provider and administrator well-positioned for increased presence

September 2, 2020 (RINGWOOD, NJ) — Dealer Owned Warranty Company (DOWC), a leading provider and administrator of F&I products and services, is proud to announce the appointment of industry veteran Gene Silas as Director of Sales.

Mr. Silas brings a wealth of experience and dealer relationships to his new role at DOWC. Following his service as a Marine, Silas entered the automotive space working his way through all positions in a dealership, eventually becoming the General Manager in several stores. Recognized for his talent, he was recruited as an F&I Specialist by one of the largest independent providers of F&I products in the industry. Over the next two decades, Silas excelled through the ranks from that initial role to District Manager and finally to Regional Manager. He was instrumental in establishing that organization’s Associate Development Program.

Following on that legacy of success, Silas was invited to join one of the largest automakers in the U.S. as an Area Manager, a role in which he successfully helped build the company’s service contract and ancillary business. Roles with a major parts, service, and customer care organization and as a dealership sales consultant followed. Joining DOWC in early 2020 was a natural progression for Silas. “I am blessed to have been first a Zone Manager and now Director of Sales with the most transparent dealer-centric F&I company in the industry,” Silas states with pride.

“We are excited to have such an experienced professional, and good friend, in this position,” stated Michael LaMotta, founder of DOWC. “Every interaction with Gene is a positive learning experience. He knows the industry inside and out, and his passion for the business is unmatched.”

As Director of Sales, Silas brings his deep knowledge of the industry and natural facility for mentorship to focus on development and training of the sales team. A well-timed appointment, Silas joins the organization as its exponential growth positions it for increased presence as a disruptor in the F&I industry.

Founded by LaMotta, DOWC is a family-owned company that combines more than 30 years of automotive industry experience with cutting-edge digital process automation. DOWC delivers a full suite of F&I purchase and protection products and solutions to dealers and their customers, with a dedicated mission to promote the sale of wealth-building products that increase the dealer’s revenue.

“With Gene at the helm of our Direct and Agent teams,” says LaMotta, “our dealers will receive the immediate benefit of service that is attentive, informed, and supercharged in their representation of the absolute best products and revolutionary wealth-building structures for automotive dealers of all sizes.”

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.