With a Dealer Owned Warranty Corporation (DOWC) structure, the dealer is fully in control. You’ll form a business corporation (typically a C-Corp) and act as the obligor on all contracts. This model requires a service contract provider license, and in some states, you may face minimum net worth requirements (e.g., $10,000 recommended, $100,000 minimum in Wyoming). Additionally, you’ll need to file all contract forms with state regulators and complete lender approval filings to meet compliance standards.

DOCs use retail cost accounting, a powerful method that generates initial operating losses and Net Operating Loss (NOL) carryforwards. During the NOL period, you pay no taxes, allowing your program to build profitability faster. This tax efficiency makes DOWC's structures highly attractive for dealers with high F&I production volume and a long-term investment outlook.

Because your DOWC is a fully formed business entity, it provides the opportunity to issue loans back to your dealership and access capital as needed. Unearned premium releases are also available, giving you additional cash flow options based on the program’s reserve strength and performance. However, it’s important to note that not all products are eligible for DOWC structures. Items like GAP and Excess Wear & Tear (EWT) agreements are often excluded.

A DOWC offers high profit potential, unmatched control, and advanced tax advantages but it also requires greater regulatory responsibility and a more involved operational approach. If you're ready to take the reins of your F&I revenue stream and build your own insurance operation, ARC can help you do it right. Contact ARC today to see how a Dealer Owned Warranty Corporation could become a powerful asset in your dealership’s long-term financial strategy.