Expert Insights: How Dealer-Owned Warranty Programs Are Revolutionizing F&I

Did you know that dealerships adopting dealer-owned warranty companies are now retaining far greater profitability on service contracts, reshaping the traditional F&I landscape? In this article, we delve into dealer-owned warranty expert insights shared by industry leader Chris Weed of Wied Auto Finance Solutions

Startling Industry Trends Driving the Rise of Dealer-Owned Warranty Programs

The automotive industry is witnessing a seismic shift in how dealerships handle F&I products, especially in the realm of warranty coverage. According to Chris Weed, "Dealers are tired of the games and funny business; they want real returns and profits by controlling their own warranty programs through dealer-owned warranty companies." This candid remark reflects the growing dealer dissatisfaction with traditional reinsurance models, plagued by opaque administration fees and limited contract flexibility. Many dealers currently operate under reinsurer-controlled programs that restrict contract terms and diminish profitability on service contracts.

Post-pandemic market conditions have intensified this trend. Vehicles bought during the 2020 COVID era are now aging, resulting in extended ownership cycles averaging 13 years nationally. Dealerships recognize that the traditional 2-3 year warranty contracts no longer meet consumer needs, especially as financing terms stretch out to 72 or even 84 months. This mismatch creates a growing demand for longer, more comprehensive service contracts—something dealer-owned warranty companies are uniquely positioned to offer.

Dealer-owned warranty initiatives tap into this opportunity by giving dealerships greater control over warranty product offerings. This empowers dealers to tailor contracts to their customers’ evolving needs and service department goals, enhancing customer retention and driving revenue. It is this alignment of dealer interests with program design that is fueling industry-wide momentum toward dealer-owned warranty solutions.

Chris Weed, of Wied Auto Finance Solutions, explains, "Dealers are tired of the games and funny business; they want real returns and profits by controlling their own warranty programs through dealer-owned warranty companies."

Understanding Dealer-Owned Warranty Companies and the DOWC Program

Dealer-Owned Warranty Companies (DOWC) represent a fundamentally different operational and financial model compared to traditional reinsurance. Instead of outsourcing risk and contract management to large outside insurers, these programs allow dealerships to "self-insure" by holding the funds, paying claims directly, and benefiting from the underwriting profits.

The DOWC model grants dealers unprecedented oversight of their warranty portfolios. They manage both the risk and the claims processes, which leads to increased transparency and faster claims resolution. Moreover, because dealers hold the reserves and investment income on service contracts, they unlock new avenues for profit without sacrificing customer satisfaction.

Key Features of the DOWC Program

The DOWC program is designed to empower dealers with comprehensive control over their warranty services. This includes customizing contract durations and mileages that meet modern financing terms, which is critical in today’s automotive environment where customers are financing vehicles for longer periods. For instance, dealers can now offer 5-year, 125,000-mile contracts, a significant upgrade over older reinsurance-imposed limits.

Security is another pillar of the DOWC program. The company facilitates streamlined claims processing and financial forecasting, helping dealerships optimize their cash flow and investment income. By managing these processes internally or through trusted partners, dealers reduce the typical bottlenecks and frustrations customers face with traditional warranty companies.

Benefits of Dealer-Owned Warranty Programs for Dealerships and Customers

• Increased profitability by retaining warranty revenue: Dealers keep more of the margins that would otherwise go to reinsurers.
• Greater control over claims and customer service: Direct oversight improves customer satisfaction and dealership reputation.
• Ability to offer longer and more flexible service contracts: Aligns warranty coverage with current financing terms and customer needs.
• Enhanced customer retention through service department engagement: Encourages repeat service visits, improving service department profitability.
• Transparency and trust-building with customers: Clear, straightforward contracts reduce disputes and foster long-term loyalty.

Chris Weed emphasizes, "Offering a 5-year, 125,000-mile contract allows dealers to protect customers and bring them back to the dealership, fulfilling the original purpose of service contracts."

Challenges and Considerations When Implementing Dealer-Owned Warranty Programs

While dealer-owned warranty programs offer impressive benefits, dealerships must carefully consider implementation aspects. Managing risk internally requires strong financial discipline and expertise. Dealers must invest in training staff and aligning operational processes with warranty administration to ensure compliance and efficient claims management.

Compliance with federal regulations around Service Contract transactions and financial reporting is paramount. Dealers must work with experienced partners who understand these nuances to avoid regulatory pitfalls. Additionally, fostering dealer participation in such programs requires clear communication about the financial and operational impacts, ensuring all stakeholders understand the benefits and responsibilities.

Participation Structure and Investment Income Opportunities

Dealer participation in DOWC programs typically involves purchasing an equity interest or entering into service agreements that allow the dealer to share in underwriting profits and investment earnings from the warranty fund. This participation structure incentivizes dealers to develop strong warranty strategies and actively manage customer retention efforts.

Investment income earned on the held funds can become a substantial revenue stream, cushioning warranty profit volatility and supporting dealership growth. However, dealers must maintain accurate financial reporting and ensure federal tax compliance related to warranty income, which underscores the importance of partnering with experienced dealer-owned warranty companies.

Expert Insights & Best Practices for Maximizing Dealer-Owned Warranty Success

Chris Weed advises dealers to embrace transparency and focus on building trust with customers. He explains, "The dealers want to acquire vehicles in the service train; they want to offer service contracts that are simple and do what they say and say what they do." Success lies in offering service contracts tailored to modern ownership periods and providing reliable claims services that bring customers back.

Building strong team engagement and educating sales and service staff on the advantages of dealer-owned warranty programs is equally critical. Dealers should foster an environment where service contracts are seen as value drivers, not just add-ons. Regularly reviewing warranty metrics and customer feedback helps dealers refine offerings and ensure the program continuously meets dealer and consumer expectations.

Common FAQs About Dealer-Owned Warranty Companies

• What is a dealer-owned warranty company?
  It is a warranty company owned or controlled by the dealer or dealer group that manages vehicle service contracts internally, retaining profits and controlling claims processes.
• Is a dealer warranty worth it on a used car?
  Yes, dealer warranties provide extended coverage beyond factory terms, often with better claims support and longer protection aligned to vehicle financing periods.
• Do dealerships make money off of warranty repairs?
  Yes, through dealer-owned warranty programs, dealerships retain more warranty revenue and profit from service repairs related to the contracts.
• What to do if the dealer won't honor the warranty?
  Customers should review contract terms and contact the dealer warranty company directly. Dealer-owned programs typically offer more responsive customer service than third-party reinsurers.

Key Takeaways: Why Dealer-Owned Warranty Programs Are the Future of F&I

Dealer-owned warranty programs represent a paradigm shift that aligns warranty product control directly with those most invested in customer satisfaction: the dealerships themselves. This ownership model delivers enhanced profits, greater contract flexibility, improved transparency, and stronger customer loyalty—key advantages in today’s evolving automotive market.

As dealer groups strive to protect aging vehicles and service drives, the DOWC approach offers a sustainable, scalable solution that outperforms traditional reinsurance. Chris Weed’s expert insights highlight that dealerships who adopt these programs now position themselves for growth and resiliency well into 2026 and beyond.

Conclusion: Embracing Dealer-Owned Warranty Expert Insights for Sustainable Growth

Dealers ready to capture the full potential of F&I profits must consider dealer-owned warranty programs as a core strategy. Take control, provide transparent coverage, and build lasting customer relationships to thrive in the competitive automotive landscape.

For more information, visit: https://www.w-afs.com/ or call: 833-533-3600.

What You'll Learn

• The rising importance of dealer-owned warranty programs in the automotive market
• Differences between reinsurance and dealer-owned warranty company models
• Key benefits and challenges of implementing DOWC programs
• Expert perspectives on maximizing warranty program success
• Answers to common FAQs for dealers and customers

Sources

• https://www.w-afs.com/ - Wied Auto Finance Solutions Official Website
• Automotive News - Industry Reports on Dealer Warranty Trends
• Federal Trade Commission - Red Flags Rule & Safeguard Regulations