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Dealer Owned Warranty Company (DOWC)

A Dealer Owned Warranty Company (DOWC) is a warranty and service contract provider that is owned and operated by the dealership itself. Instead of outsourcing extended warranties, service contracts, or vehicle protection plans to third-party providers, a dealership forms its own company to administer these programs.

The primary advantage of a DOWC is that it enables the dealership to retain profits, control the customer experience, and build long-term value directly within its operations. For many dealers, establishing a DOWC is a strategic move to strengthen both profitability and customer loyalty. 

Why Dealerships Use a DOWC

Conventional third-party warranty companies collect premiums and pay claims, often leaving the dealer with little more than a commission. By contrast, a DOWC allows the dealership to retain the underwriting profit and investment income while still offering protection products to customers.

Major benefits include:

  • Profit Retention: Dealerships retain revenue that would otherwise be sent to third-party administrators.
  • Customer Retention: Warranty customers are more likely to return to the dealership for service.
  • Control: Dealers manage claim processes, pricing, and program design.
  • Long-Term Value: A DOWC can become a significant asset on the balance sheet.

In short, a DOWC shifts warranty programs from a pass-through revenue stream to a dealership-owned profit center.

How a DOWC Works

A DOWC is structured as a separate legal entity owned by the dealership or dealer group. It sells and administers service contracts, GAP coverage, and other vehicle protection products.

Typical Process:

  • Customer Purchase: A buyer selects an extended warranty or service contract at the time of vehicle sale.
  • Revenue Capture: Instead of forwarding the premium to a third party, the dealership-owned warranty company collects it.
  • Claims Management: The DOWC pays out approved claims, often through the dealership’s own service department.
  • Profit Realization: Remaining funds, along with investment income, are retained by the DOWC and, ultimately, the dealership.

This setup ensures profits stay in-house while also giving the dealer control over service delivery.

Significant Features of a Dealer-Owned Warranty Company

  • Flexibility in Product Offerings: Dealers decide what types of coverage to provide, such as extended service contracts, maintenance plans, GAP insurance, or tire-and-wheel protection.
  • Customization: Coverage can be tailored to fit customer demographics and dealership goals.
  • Transparency: Dealers see exactly where profits and claims are going.
  • Tax Efficiency: Depending on structure, DOWCs may provide tax advantages that third-party contracts cannot. 

Advantages of a DOWC

  • Higher Gross Profits: Service contract sales contribute directly to dealership revenue.
  • Improved CSI Scores: Customers feel confident when warranty claims are handled quickly and fairly.
  • Stronger Service Drive Revenue: Warranty holders typically return for covered repairs, boosting fixed operations.
  • Competitive Edge: Offering in-house protection programs helps differentiate us from other dealerships.
  • Investment Growth: Unused reserves can generate additional income through investments.

Challenges and Considerations

While a DOWC offers clear benefits, there are challenges to consider.

  • Regulatory Compliance: Warranty companies must comply with state and federal insurance laws and regulations.
  • Capital Requirements: Dealers must provide initial funding to establish the company.
  • Administrative Oversight: Managing claims, reserves, and compliance requires expertise.
  • Risk Exposure: Dealerships assume liability for claims, so accurate underwriting is essential.
  • Training Needs: F&I managers and sales teams must be skilled in presenting in-house products.

For these reasons, many dealers partner with consulting or training firms to set up and manage their DOWC effectively.

DOWC vs. Third-Party Warranty Providers

The main difference between a DOWC and third-party providers lies in control and profitability.

  • DOWC: The dealer owns the company, retains profits, manages claims, and controls the customer experience.
  • Third-Party Provider: External company takes on claims risk and keeps the bulk of profits, with the dealer receiving a commission. 

With a third-party model, dealerships often have little visibility into how claims are processed, which can affect customer satisfaction. By contrast, a DOWC enables the dealer to create customized coverage plans, establish pricing strategies, and ensure that claims are handled efficiently in-house. This flexibility strengthens customer trust, increases retention, and enables dealers to align protection products with their overall sales and service strategy. 

Dealers looking for long-term revenue growth and customer loyalty often prefer the DOWC model, despite its added complexity and upfront investment.

Common Missteps in DOWC Management

  • Underestimating Compliance: Ignoring regulatory requirements can result in significant legal and financial penalties.
  • Lack of Transparency: Failing to explain benefits clearly erodes customer trust.
  • Weak Sales Process: Failing to integrate warranty discussions into the sales journey reduces penetration rates.
  • Failure to Track Performance: Without consistent reporting, dealers miss opportunities to enhance their performance.

Avoiding these pitfalls requires both operational discipline and ongoing training.

If your dealership is considering a DOWC, the right training and processes make all the difference. Automotive Training Network provides the expertise to help F&I teams, advisors, and leadership present warranty products with confidence and manage them effectively.

Discover how ATN can help your dealership grow profitability through a Dealer-Owned Warranty Company. Contact Automotive Training Network to learn more.