Dealer reinsurance is a specialized financial product that helps automotive dealers fulfill their warranty obligations for vehicle service contracts, Certified Pre-owned programs, GAP, tire and wheel protection, and several other F&I products. It allows the dealers to gain greater control over the financial aspects of their business.
Key Benefit of Dealer Reinsurance
A key benefit of a dealer’s reinsurance company is to hold required reserves in excess of claims and cancellations in a tax-advantaged manner. Establishing a reinsurance company also allows the dealer to keep a greater share of the profits generated from the F&I products that they sell. In addition, when a dealer is running his or her own reinsurance company, the funds can be used to enable a number of financial transactions, such as the acquisition of new dealerships, investment in real estate, or as a factor in their own wealth planning.