The Fundamentals of Dealer Participation From Reinsurance to Dealer Obligor
Today, profit participation is a critical profit center and major source of wealth creation at the dealership. Those who fail to regularly revisit their strategy and assess their current needs may risk leaving a significant amount of money on the table. By regularly evaluating your participation performance, you can ensure you’re using the right model for your strategy — and that you’re getting the greatest possible returns. Having access to participation experts with extensive knowledge of the benefits and limitations of all available models can go a long way in making sure you’re making the most of your revenue.
What Are Profit Participation Models?
Profit participation, including reinsurance, allows you to share in the underwriting profit and potential investment income on the F&I products you sell. When a protection product is sold, part of that gross is held in reserve by the F&I product provider to pay claims. But that money doesn’t just sit idle — it’s used to generate income through interest. There are a range of participation vehicles that allow you, the dealer, to participate in that income. The type and level of participation depend on your business needs, strategy, and tolerance for risk. You can build a participation position for vehicle service contracts, limited warranties, GAP insurance, tire and wheel protection, appearance protection, and other F&I products that make sense for your market and current business needs.
