For Mark Macek, president, United States Warranty Corp. (USWC), getting into the business was something of a family affair. Bill Davis, who would later become Macek’s father-in-law, founded the company in 1974. Macek himself joined in August 1983, starting part time, and joined fill time in February 1984 – and he never looked back.
USWC focuses specifically on dealer-owned warranty companies. “I believe that this business model created what USWC is today. We have found our niche and expanded it,” Macek said. They began by selling and administering vehicle service contracts (VSCs) in the state of Florida. Today, they are licensed in 45 states, and are a full-fledged F&I provider, but they focus specifically on the warranty company aspect of the business.
“We target any auto dealer, lender, credit union, OEM or agent that wants to maximize their profits on the VSC and other F&I products,” said Macek. “Our dealer-owned warranty company concept is easy to understand: the dealer owns the onshore company, which is a separate entity from the dealership. Therefore, he controls the company from rates, reserves and coverages, to investment decisions, etc. They also can write pre-paid maintenance and road hazard contracts. We also offer a vast array of very competitively priced F&I products.”
In a dealer-owned warranty company structure, the dealer himself forms a separate corporate entity, apart from the dealership itself, for the sole purpose of writing service contracts. That entity then becomes the obligor; where USWC fits in is that it handles the back-end functions, taking a fee from each contract for that purpose. He noted that they tell dealers to make the warranties they offer through these programs better than the ones offered by the manufacturer – this way, everyone, including the consumer, wins from the arrangement.
While they started with VSCs, and VSCs remain a key product, today they have expanded the concept to offer everything from pre-paid maintenance plans, to road hazard/tire & wheel plans, to GAP and theft protection. They also offer products such as appearance protection packages, key replacement and lease wear protection plans, plus a long list of others – there is almost no product category USWC cannot help a dealer set up under the dealer-owned warranty company structure.
And Macek believes this business model is perfect for agents as well. “No longer will agents have to worry about competitors,” he noted. “The dealer-owned warranty company creates long-term dealer loyalty and retention. The dealer will never leave, since the agent has brought him a totally transparent program where the dealer retains 100% of all underwriting profit and investment income. The overall returns far outpace any other program available to the dealer, while also giving them 100% control.”
Macek is also cautiously optimistic about what the future holds for his company, and the industry as a whole. While there are certainly bumps to be dealt with, he sees this as a bright time to be in the business. “The auto industry is heading in the right direction but we had better remember the lessons learned from 3-4 years ago. Keep expenses in check and don’t get lackadaisical,” he cautioned.
He does not want dealers to forget the lessons learned during the recession and the hard times that came with it. He also noted that pressures from lenders – due to a variety of factors, including the Consumer Financial Protection Bureau (CFPB) guidance that came out in 2013 – to be careful about what products they finance will certainly be one more reason for dealers to find better ways to position F&I products, of which dealer-owned warranty companies are a good option. But he does not think these pressures from lenders will be a huge hurdle for dealers, agents or companies such as USWC. “We are aware of the changing environment and we are making the necessary smart business decisions,” he noted. In fact, he has a list of key points that everyone should keep in mind to be successful and profitable in this industry:
- Be a student of the business.
- Educate yourself to know more about your competition than they know about you.
- Always maintain integrity.
- Don’t over promise and under deliver and stay persistent and patient.
- Hard work does pay off.