Archive for 2019

Dealer Investment Advantage


Dealer Investment Advantage

By Ryan Nelson


Tax deferral, preferential treatments of distributions and the ability to participate in the underwriting profit of the dealers F&I business are just a few of the reasons that number of dealers participating in reinsurance has grown exponentially over the last two decades. Although dealers have certainly profited from these structures, there are some distinct disadvantages to several of the traditional programs being offered today – especially considering many of the underlying changes in our business.


The upside and downside


The appeal of 100% participation in underwriting profit and investment income certainly has a nice ring to it, and undoubtedly provides generous benefits to the shareholder over the long term. Long term is the issue. Traditionally dealers have to wait years, if not longer, to access any significant amount of surplus and put it to better use than earning a relatively low rate of return. Dealers are faced with staring at cession statements and trust balances that reflect hundreds of thousands, if not millions of dollars in ceded premium. At the same time, they can access only a small fraction of what has been ceded. This all too familiar situation requires the dealer to make a difficult decision; hold off on projects or acquisitions to grow the business, or face the reality of looking for external capital at a significantly higher cost of capital.


This problem is only being exacerbated by the lengthening of earning patterns as service contracts, limited warranties and even ancillary products are being written on longer and longer terms. Over the seven years it takes some contracts to fully earn, the dealer could be faced with the opportunity to expand their business operations with an acquisition, remodel the dealership, or pay down floor plan amongst many other capital requirements todays dealers face.


The current state of affairs:


I recently sat with a dealer who laughed out loud when I asked if it is any more expensive to operate a dealership today than it was 10-20 years ago. The laughter led the dealer to recount the variety of capital-intensive projects he is being asked to undertake while keeping his eye on long-term growth for his 100+ associates. At the same time, we were discussing the expense of running a dealership in today’s reality, while we simultaneously grabbed his cession statements and trust account documents from a big box provider to review them. The dealer was dismayed when we determined when he would be able to access any measurable amount of surplus to assist in daily operations. This led us to talk about how his operations would change if he was able to access the million plus dollars he had in unearned reserves. To say he was excited at the opportunity of putting HIS reinsurance money to work for him earlier, and more often, than what he was allowed to do through his current provider would be a monumental understatement.


The Dealer. The Investment. The Advantage.


The foremost purpose for a dealer to get into a participation structure is for the benefit of the dealer. This could be long-term wealth building, a way to prop up cash flow while the day-to-day operations of the store are seeing the profits undertake tremendous compression, or a way to fund expansion efforts. If the provider and agent do not place the dealers needs first, everyone loses. The dealer is the single most important factor in the analysis of determining which participation structure is right for their needs.


Once the dealer’s needs are determined and isolated, it is time to determine the desired investment results. Does the dealer want to sock money away over the long haul and use the participation structure as a walkaway, or retirement benefit? Or, does the dealer want to access as much cash as possible, as soon as possible, with the least amount of taxes and expense? More and more dealers are choosing the latter as a result of the current business climate. This means that the investment the dealer is making is not going into a trust account with a mix of cash equivalents, bonds and equities. Rather, it means the dealer is making their investment in their most precious assets — themselves and their dealerships.


The opportunity to access a large percentage of the unearned premiums early in the participation structures lifespan can prove transformational. Imagine if you are an average size dealer, selling an average amount of products and all of a sudden you are given the chance to access over a million dollars to use as the you see fit! Now imagine if the capital resource you are accessing this money from is yourself, and the interest repayment on the funds is paid – you guessed it – back to yourself. Go one step further and envision this happening every 90 days. A cash infusion into the business every 90 days with a repayment structure built to benefit the dealer – now that’s what I call an advantage.


The carriage and the horse(power):


There are certainly structures available which allow or mandate the dealer hold reserves in an accessible account, and these have been around for decades. Dealer Obligor programs and DOWCs are viable options if the dealer understands all the potential downsides each of those structures bring with them. DO and DOWC structures certainly have some benefits, but they are not for everyone, and the industry has proven every dealer is not for them. If they were the unicorns of participation structures, we would be operating in a homogenously structured environment. The fact is, some dealers are ideal fits for an Affiliated Reinsurance Company (CFC), while some dealers require no ceding limitations and are better suited for a Non-Controlled Foreign Corporation (NCFC) and there are some who demand no ceding limitations but are uncomfortable with NCFCs and their PFIC uncertainty. Again, the dealer should be provided options, and all of the dealer’s options should include the choice whether to access their unearned reserves or not. Regardless of the carriage (CFC, NCFC, or others), the horsepower – being the availability to put more of the dealer’s money to work for them sooner – should always be available to the dealer as a choice.


National Automotive Experts has been providing dealers and agents with innovative solutions for over two decades and has raised the table stakes by releasing their Dealer Investment Advantage program to Auto, Motorcycle and RV dealers – regardless of the carriage (structure). If you are a dealer and would like to put your money to work for you sooner and more frequently, reach out to schedule a reinsurance and proforma review today.

NAE/NWAN Announces Ryan Nelson as Vice President of Business Development

Strongsville, Ohio – National Automotive Experts (NAE) and NWAN, Inc. (NWAN) announce the promotion of Ryan Nelson to Vice President of Business Development.  Nelson has served as National Sales Manager of NAE/NWAN and has been part of the company for close to three years.  Prior to NAE/NWAN, he held leadership positions at Spencer Capital, Cunningham Lindsey and Zurich North America. 

“Ryan has become an invaluable asset to our organization since joining the company, said David Neuenschwander, President of NAE/NWAN.  “He has extensive experience in building and leading teams and his track record for delivering results is unmatched.  Ryan makes us better and will get us where we want to go.” 

“I am excited about the future of NAE/NWAN, as we have a lot of momentum heading into 2019 and beyond,” said Nelson.  “When I started with NAE/NWAN, I knew that the company offered me the opportunity to bring my entrepreneurial spirit to a nimble and thriving company. The next few years will be pivotal in the Auto, RV and Powersports arena and I am looking forward to driving our growth in those industries.” 

“Every day, I look at the passion and drive that Ryan brings to our company and know he is the perfect person to lead our Business Development team,” said Kelly Price, CEO of NAE/NWAN.  “It is a true honor to work with him.”

Essential Enhanced Service Contract – Providing Agents the Essentials to Help Grow Their Business


The independent agent landscape has never been more competitive. Today’s agents are in need of industry-leading products, with a competitive rates structure.  With this strategy in mind, National Automotive Experts went back to the drawing board and completely redesigned their Essential service contract platform to better meet the needs of their agents and dealers. 

Over 34 million pre-owned vehicles are sold every year, and many of them do not qualify for new car service contract rates and terms.  This leaves the dealer and customer little choice in how to best protect their vehicle purchase.  Just because a vehicle is older with slightly higher mileage, it doesn’t mean the customer shouldn’t have the opportunity to purchase a service contract from a premier service contract provider… Now they do!

After reviewing the products currently available for agents to offer dealers, it was apparent that there was no right solution available.  While numerous “inexpensive” contracts exist, the low cost often comes with minimal coverage, and in some cases, lower administration service.  Several “tier one” options are also available, but those options provide limited coverage and terms, and generally have greatly reduced eligibility.

Dealers want great contract administration, industry-leading coverage and terms, as well as competitive rates. They must be able to sell a profitable product that is approved for finance advance by major lendors.

National Automotive Experts is excited to introduce the all new Essential VSC platform.  The Essential VSC program was designed to provide the contract holder with world-class service, the dealer with confidence in a premier administration company backed by the largest insurer in the industry, and agents with a price-competitive program to prospect additional franchise and pre-owned dealers.

Agents can walk into any dealership across the country and have confidence with competitive rates supported by updated marketing materials and industry-leading coverage.

People. Products. Performance. The way it should be!

Creating Value with a Lifetime Warranty

Creating Value with a Lifetime Warranty

by Chuck Chase and Matt Maish

Lifetime warranty programs are an ever-popular offering in the automotive industry. As the industry continues to change, dealers are looking for an edge to differentiate themselves within their market. Current market statistics show that 54% of customers come to a dealership intending to buy but never do, advertising cost per new car is up to $629 and climbing, retail net profit per new vehicle sold in 2017 was $421 and finally, only 30% of vehicles are serviced at an auto dealership today.  

Warranty Forever® is a market differentiating, lifetime warranty program that allows dealers to build value and retain customers with the following advantages:  

Creates Value with a Lifetime Brand:

Consumers will pay for what makes you different or better. The exclusive territories included with Warranty Forever® create a distinct market advantage. This exclusivity allows dealers to build equity through consistent lifetime warranty branding utilized throughout the sales process. In other words, it’s something designed to enhance rather than compete with everything currently in place.

Steps to creating value with a lifetime brand:

  1. Partner with a lifetime brand that provides an exclusive territory preventing competing stores from selling the same value.
  2. Use the lifetime brand in all dealership advertising campaigns to build brand equity.
  3. Leverage the power of social media to interact and draw customers to the dealership through use of the lifetime brand.
  4. Create a program that doesn’t disrupt the environment currently in place inside a prospective new dealership. In other words, create something that isn’t designed to compete with what is in place, but rather, to enhance it.
Creates a Unique Customer Experience:

How do you create a unique customer experience using a lifetime warranty brand? Don’t take our word for it, “Today more than ever the customer experience matters,” says Jim Roche Sr. VP Cox Automotive. “Uber. Amazon. Dollar Shave Club. Open Table. All of these fantastic experiences we have as consumers shape what we expect to happen inside of automotive dealerships.” With such a competitive landscape, it’s important that dealerships differentiate themselves in order to break the tie between themselves and their competition.

Steps to creating a unique customer experience:

  1. Interact with customers by leveraging the lifetime brand from the moment they reach out to you digitally or in person.
  2. Put yourself in the customer’s shoes. With such a competitive landscape, what do you currently have in place to break the tie between yourself and your competition? If all things are equal, but one dealer provides the customer with the peace of mind of knowing their most expensive components will be covered for as long as they own the vehicle, and at no cost to the customer no less, which vehicle would you buy?
  3. Teach, implement and monitor a sales process within the service department. The key is holding the team accountable to utilizing it. Remember 85% of new car buyers state their experience with the service department has influenced their likelihood of purchasing another vehicle from that dealership.
  4. Make it fun. People want to be part of the success. Share your dealership successes with customers. For instance: a Warranty Forever® dealership celebrates a customer’s fifth service visit by ringing a large bell and the entire dealership would stop what they were doing, stand up, and start clapping! All of them!
Builds Future Sales Pipeline by focusing on Service Retention:

85% of new car buyers state their experience with the service department has influenced their likelihood of purchasing another vehicle from that dealership. NADA reports customers are 76% more likely to purchase another vehicle from their original selling dealer if they utilize that dealer’s service department for ALL their recommended maintenance. Warranty Forever® is a lifetime program designed to drive the customer back to their selling dealer for all service and maintenance work. Any work performed outside of the selling dealer must be pre-authorized by contacting the program administrator prior to the work being performed. When customers communicate their intent to service their vehicle outside of the selling dealership, our pre-authorization team converts 40% of those customers back to the selling dealer. What would each of those customers be worth over their lifetime if the average bill per service visit was $178? On average, Auto Warranty Forever® dealerships have seen a 70% increase in customer pay repair orders, a 40% increase in warranty pay repair orders and a net return of $1,675 per unit sold. But that’s just the start…

Steps for focusing on Service Retention:

  1. Create a 1st service appointment process, which allows you to spend time and effort with each new customer immediately after they purchase a vehicle. This will show them where to park, what door to walk in, and to whom they should give their keys.
  2. Incentivize your customer to return to your dealership to service with your facility. Price match, provide a free car wash, provide loaners…but whatever you do, make sure the customer knows what you do differently from the quick lube shop down the street.
  3. Make sure you can control the claims if the customer is in your area, so we don’t lose the brand equity and customer experience perception created before the claim.

The industry remains focused on front end sales, but consider this:  If there are 17 million new cars being sold in the United States over the course of a year, but 320 million service tickets being written, where is the real opportunity?  Warranty Forever® is a program that impacts the entire dealership, from sales, through F&I and then ultimately service. This process is bolstered through account management and training by Warranty Forever® Program Managers. These industry professionals ensure that dealership personnel are proficient in the sales processes and best practices required to make the program a success.

Learn more about Warranty Forever® by visiting the official website.