Participation programs offer substantial benefits not just for dealers, but also for their employees and the long-term success of the dealership. These programs allow dealers to retain underwriting profits and investment income typically captured by traditional insurance providers. While there are several types of participation structures available, the key is understanding what works best for your specific business and goals.
From Risk to Reward
Dealer participation programs began with dealer profit via product markup. This developed into the inclusion of incentives for owners, managers, and F&I personnel. Over time, this progressed to include profit-sharing models that align dealership performance with underwriting and investment partners. Programs advanced to include reinsurance options, allowing dealers to participate with less complexity and greater risk control.
Today’s programs have evolved to offer more options to fit dealer needs. Properly structured modern participation programs are more efficient, significantly less risky, and can be powerful tools for generating long-term wealth. When done right, they can create a multi-million-dollar asset over time.
Don’t Let Uncertainty Stop You
It’s common for dealers to hesitate simply because they don’t fully understand how profit participation works. But here’s some perspective: in almost every major U.S. city, the tallest and most prominent buildings belong to insurance companies. Why? Because the insurance model is incredibly profitable. And they’d prefer you not realize you can do it too.
It’s a myth that only large dealer groups can benefit. Even smaller operations selling as few as 10 service contracts per month can take advantage of participation programs — including chemical, ancillary, and other F&I products. For many small and mid-size dealers, these programs function as a personalized retirement plan — a true Wall Street strategy for Main Street businesses.
Understanding Profit Participation Structures
At DOWC, we believe the Dealer Owned Warranty Company is the ultimate form of participation, but we also recognize that one size doesn’t fit all. That’s why we offer a full suite of participation structures tailored to meet your dealership’s goals and risk tolerance. Here’s an overview of what we offer:
- DOWC® Structure: The Industry-Leading Model
A Dealer Owned Warranty Company is a domestic C-corporation that serves as the provider of F&I products. It collects premiums and pays claims, positioning the dealer as the financial beneficiary. For federal tax purposes, a DOWC is treated as an insurance company but does not face state regulatory burdens. It must, however, meet state licensing and lender requirements. - Reinsurance Structure: Balancing Risk and Reward
Reinsurance allows dealers to participate in insurance profits and investment income without becoming a direct provider. It’s ideal for established dealers looking for a deeper dive into participation with less complexity and greater risk control, provided premiums remain under certain thresholds. - DOWCReTM Structure: An Innovative Hybrid
The DOWCRe is a unique hybrid that combines the advantages of both DOWC and reinsurance models. It provides dealers with regulatory protection through a reinsurance structure while allowing for the financial benefits of a net operating loss — similar to a DOWC. - Dealer Obligor Structure: Flexibility and Control
Dealer Obligor programs place the dealer as the obligor on contracts, without being regulated as an insurance company. While this grants maximum product flexibility, it also means retaining contingent liability — dealers must understand and be comfortable with this trade-off. - Profit Share Structure: Reward with Reduced Risk
Profit Share programs allow dealers to participate in underwriting and investment performance with minimized risk. Contracts are retrospectively assessed, making this an attractive option for dealers new to participation or not ready to take on full responsibility. - Guaranteed Profit Share: Participation Without the Pressure
This option is perfect for risk-averse dealers. It offers upfront disbursements based on expected performance — allowing participation in the upside with none of the downside. A low-risk, high-reward entry point.
Investing in stocks or mutual funds requires your money and your time. But participation programs work differently. Every time a customer buys a service contract or ancillary product, you’re feeding your own profit center. You’re not just selling protection — you’re building a financial asset.
If you already have a participation program, it might be time to compare it against new options. Even if you’re a smaller dealer, understanding your potential in participation is absolutely worth the time. With the right mix of education, F&I strategy, and support, participation can significantly contribute to your long-term financial success.
