We don’t have to tell you how incredibly competitive the automotive industry is. You’re left competing with area dealers to sell the same vehicles at the same price point that’s been established by the manufacturers. Any area where you can maximize profits is going to help give you a leg up on the competition. At Avenew Group, LLC, we provide strategic dealership solutions that are meant to help you grow your profits. One such way is showing you how to get larger returns with your DOWC. We have assembled a short guide with five ways that can help.
Long-term tax deferral
When you take in money for your reinsurance company, you’re allowed to let it sit and accumulate over time without paying any tax penalties. You will eventually have to pay taxes on the growth of those funds, but not until you take a constructive receipt of the profits. You’re able to let your accounts grow over time without the IRS eating into your long-term profits.
Elimination of fees and taxes
When you run your own reinsurance company, you don’t have to pay fees or taxes associated with providing service to anyone else. You will not only save your organization money, but you can pass those savings on to customers, who appreciate even the smallest amount of savings when buying a car.
Retain all cancelation fees
Should you have buyers who cancel service contracts or insurance policies, you can keep 100% of cancelation fees. Cancelation fees are a necessary part of establishing contracts with customers because it still guarantees you a portion of the funds from the deal. If you have a third party managing those contracts, you would have to pay them a cancelation fee as well. By running your own reinsurance company, you’re able to retain all fees for yourself, which is another way that you can pass savings on to customers.
Treated as an insurance company by the IRS
Nonlife insurance companies are exempt from federal income taxes under the IRS’ section 831(b). This means that profits that come directly from underwriting services cannot be taxed by small insurance companies. In order to qualify as a small insurance company, you cannot collect more than $2.2 million annually in written premiums. With your own reinsurance company, you’ll fall under this designation and bring in larger returns with each sale.
Control coverages, rates, and branding
When you’re the owner and operator of your reinsurance company, you get to make the rules. This means that you establish your coverages, rates, and branding. As a car dealer, you understand the necessity to fit your company’s branding within the specific parameters of an automaker. With your DOWC, you aren’t at the mercy of a third party’s requirements. You can establish coverage and rates based on your market and customer demographics. Additionally, you can brand your coverage according to your dealership or auto group.
Schedule a call with Avenew
If you’d like to get larger returns with a DOWC, don’t hesitate to give our team at Avenew Group, LLC a call today. We can help you establish your DOWC to maximize profits now and in the long term. Reach out by calling 616-259-6050 or send a message using our contact form to schedule a call with our experts. We want to help you get on the path to achieving your long-term goals.