PUB. 2 ISSUE 1 2024-2025 2024 Chicago Drives Electric Concludes Third Annual EV Test Drive Event
Memberships in: • AUTOCPA Group • The American Institute of Certified Public Accountants • The Illinois CPA Society CERTIFIED PUBLIC ACCOUNTANTS Located in Central Illinois, we serve the entire state. Contact us today to learn how we can help your dealership thrive. Drive Your Dealership Toward Financial Success We specialize in automobile dealers in the following areas: • Dealership valuations • Automobile dealer legal support • Buy-Sells for dealerships • LIFO inventory computations • Financial statement analysis • Corporation Income Tax returns • Personal Income Tax returns • CPA prepared financial statements • Dealer estate planning • Employee theft consulting • Internal control studies and audits • Profit consulting • Training office managers/CFO’s • 401K Audits Serving more than 250 Automobile Dealers throughout the United States (309) 662-8797 Email: woodwardassoc@cpaauto.com Website: www.cpaauto.com 1707 Clearwater Avenue P.O. Box 1584 ·Bloomington, IL 61702
8 ©2024 The Chicago Automobile Trade Association | The newsLINK Group LLC. CATA Up To Speed is published four times each year by The newsLINK Group LLC for the Chicago Automobile Trade Association and is the official publication for this association. The information contained in this publication is intended to provide general information for review, consideration and education. The contents do not constitute legal advice and should not be relied on as such. If you need legal advice or assistance, it is strongly recommended that you contact an attorney as to your circumstances. The statements and opinions expressed in this publication are those of the individual authors and do not necessarily represent the views of the Chicago Automobile Trade Association, its board of directors or the publisher. Likewise, the appearance of advertisements within this publication does not constitute an endorsement or recommendation of any product or service advertised. CATA Up To Speed is a collective work, and as such, some articles are submitted by authors who are independent of the Chicago Automobile Trade Association. While CATA Up To Speed encourages a first-print policy, in cases where this is not possible, every effort has been made to comply with any known reprint guidelines or restrictions. Content may not be reproduced or reprinted without prior written permission. For further information, please contact the publisher at (855) 747-4003. CONTENTS 5 Letter from the President The Effective Work of Chicago Dealers By Jennifer Morand, President, CATA 6 2024 Chicago Drives Electric Concludes Third Annual EV Test Drive Event 8 Chicagoland New-Car Dealers Raise More Than $80,000 for the USO Through Barbecue for the Troops Fundraisers 11 Two New First Look for Charity Beneficiaries Named Folds of Honor and Violet Foundation for Pediatric Brain Cancer Join the Roster of 18 Benefiting Charities 14 Chicago Auto Show Appoints New Show Contractors for 2025 Show 17 Hidden Opportunity of High Mileage Vehicles in the Service Drive Why One-Line Repair Orders are Eliminating Extra Revenue! By Leigh Silver, Chief Executive Officer, Dynatron 20 Dealers Renew Focus on F&I Profit Participation Strategies Learn What Steps Auto Dealers Can Take to Find the F&I Profit Program That Best Meets Their Goals By Truist Dealer Services, in partnership with Matt Joffe, Managing Shareholder for Total Warranty Services 11 CATA UP TO SPEED 3
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It’s been a busy fall at the Chicago Automobile Trade Association. This season is the perfect time to take a moment to pause and reflect on the effective work our team has produced over the last quarter to support our dealer and allied members, to drive awareness and interest in the latest EVs, hybrids and plug-in hybrids with Chicago Drives Electric, and to raise a great deal of funds for the USO while promoting the goodwill of local new-car dealers. We’re now shifting gears to ramp up planning for the 2025 Chicago Auto Show and First Look for Charity black-tie gala this February. Back in October, we wrapped the third annual Chicago Drives Electric EV test drive and educational event, once again held at the CATA headquarters. We first introduced this event in the fall of 2022 in an effort to raise awareness of the many benefits of all-electric, hybrid and plug-in hybrid vehicles and to help consumers understand how EVs can fit individual needs and lifestyles. This year’s event hosted more brands than ever before, with more than 40 different models to experience from brands including Audi, BMW, Cadillac, Chevrolet, Ford, GMC, Hyundai, Kia, Subaru, Toyota and Volvo. We also had Nissan and Lexus participate in our Media Day, held just prior to the public test drive event, to generate awareness and interest. The event attracted 1,630 total registered drivers and netted more than 6,102 in-vehicle experiences — an increase in attendance and participation from previous years. We will incorporate the Chicago Drives Electric theme and ride-along experience inside of the 2025 Chicago Auto Show, as we have in the past two years. This past summer, CATA once again partnered with the USO to host the 11th annual Barbecue for the Troops fundraisers at dealerships throughout the area. A total of 60 local new-car dealerships rallied their communities to raise $81,267 for the USO last summer. That tally adds to the previous year’s fundraising efforts, netting more than $1.2 million raised for local troops. The barbecue-themed events held at CATA dealers featured everything from patriotic ceremonies, classic car shows, live music, games for kids of all ages and, of course, barbecues — all to support a wonderful mission. We introduced the weekly Drive Chicago e-newsletter a couple of months ago, which highlights automotive news, new-vehicle reviews that are posted to DriveChicago.com, interview highlights from industry guests on Drive Chicago Radio (airing Saturday mornings on WLS-AM, 8-9 a.m.), and other special events. The Drive Chicago e-newsletter is a great tool for our dealers to share industry-related news as well as new-vehicle review content for their social media channels. As a CATA member, this will be emailed to you weekly. If you have not received this newsletter and would like to be added to the distribution list, please email Patrick Ziegenfuss at pziegenfuss@drivechicago.com. As we head into the winter season, planning is ramping up for the Chicago Auto Show. We launched our 2025 Exhibitor Resource Center along with our show “kit” and pricing in September. Our gears shift to planning for and executing another successful Chicago Auto Show. Save the dates for First Look for Charity on the evening of Feb. 7 and the public show on Feb. 8-17, 2025, at McCormick Place. Thank you for being an integral part of our association. We look forward to another successful quarter ahead! Jennifer Morand President, Chicago Automobile Trade Association General Manager, Chicago Auto Show Letter from the President The Effective Work of Chicago Dealers By Jennifer Morand, President, CATA CATA UP TO SPEED 5
The CATA successfully concluded its third annual fall Chicago Drives Electric experiential test drive and educational event. Once again, the CATA plans to bring Chicago Drives Electric indoors to the 2025 Chicago Auto Show this Feb. 8-17 at McCormick Place. Chicago Drives Electric was launched in the fall of 2022 as an effort to raise awareness of the many benefits of all-electric, hybrid and plug-in hybrid vehicles and to help consumers understand how electric vehicles (EVs) can fit individual needs and lifestyles. This year’s event hosted more brands than ever before, with more than 40 different models to experience from brands including Audi, BMW, Cadillac, Chevrolet, Ford, GMC, Hyundai, Kia, Subaru, Toyota and Volvo. Nissan and Lexus also participated in the media and industry event held just prior to the consumer event. Over the course of the weekend, Chicago Drives Electric attracted 1,630 total registered drivers and netted more than 6,102 in-vehicle experiences, an increase in attendance and consumer participation from previous years. The event was once again supported by industry partners Cars.com, ComEd and Powering Chicago, who each contributed valuable insights during the industry and media program that kicked off the Chicago Drives Electric event. In addition to having experts onsite to answer consumer questions throughout the weekend, ComEd held a press conference in conjunction with Chicago Drives Electric, where it announced its new Point of Purchase EV Fleet Rebate Program. Cars.com, a longtime supporter of the Chicago Auto Show, provided real-time appraisals of consumer vehicles throughout the weekend. At the end of the appraisal, consumers left with information about the current price of their car, truck or SUV and information on nearby new-car dealers they can follow up with should they want to trade in their vehicle. “Chicago Drives Electric is a unique event that continues to grow each year, and we are thrilled to be able to provide this valuable one-stop-shop for EV education and test drives,” said CATA Chairman Jason Roberts. “There are still many questions around EV ownership and continued interest from today’s consumers, as evidenced by the success of this event. We are happy to continue to serve as a resource and research platform for those in the market both during this fall event and at the Chicago Auto Show.” “In surveying Chicago Drives Electric attendees, it was reported that nearly 60% of attendees indicated that they are likely to consider purchasing an EV. Furthermore, of those attendees who are actively shopping for their next vehicle within the next three months, nearly 80% report that next vehicle will likely be an EV,” continued Roberts. “We are excited to continue the momentum of Chicago Drives Electric and once again bring it into the 2025 Chicago Auto Show as an indoor test track and EV education hub,” said Chicago Auto Show General Manager Jennifer Morand. “With more and more brands expanding their electrified vehicle offerings, it is a great place to cross-shop and experience a wide range of EVs all in one location.” 2024 Chicago Drives Electric Concludes Third Annual EV Test Drive Event 6 CATA UP TO SPEED
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Chicagoland New Car Dealers Raise More Than $80,000 for the USO Through Barbecue for the Troops Fundraisers 8 CATA UP TO SPEED
The Chicago Automobile Trade Association (CATA), the Chicago-area’s new car dealer association, once again partnered with the USO to host the 11th annual Barbecue for the Troops fundraisers. To date, 60 local new-car dealerships rallied their communities to bring in $81,267 for the USO. The barbecue-themed events, held in September, featured everything from patriotic ceremonies, classic car shows, live music, games for kids of all ages and, of course, barbecues. Additionally, participating dealers donated to the cause for every test drive that took place in the month of July. “Supporting our local communities and those in need is right within the wheelhouse of our local car dealers and what better way to make an impact than rallying together for this great cause,” said CATA Chairman Jason Roberts. “We are thrilled to once again present this check to the USO who do such crucial work supporting our service members and their families.” This year’s fundraiser brought the grand total of the more than decade-long program to more than $1.2 million, supporting the USO initiatives with nearly 700 fundraisers through the years. These funds enable the USO to lend support to more than 300,000 service members and their families annually. “We are so grateful for the support we receive from our partners at the Chicago Automobile Trade Association and the local new-car dealerships,” said USO Executive Director in Illinois Christopher Schmidt. “This grassroots fundraiser has now raised more than $1.2 million in crucial funds that support our service members and their families. On behalf of the USO and all those who serve our nation, we thank all the participating dealers and their communities for their generous support over the last 11 years.” The program culminated in late August where CATA board members presented a check to the USO for a total of $81,267.48. “I would be remiss if I didn’t mention the incredible support that we received from our media partners surrounding this fundraiser,” said Roberts. “Many thanks are due to all our partners in TV, radio and outdoor advertising media who helped us promote this worthwhile program. A special thanks to ABC 7 Chicago for producing the TV spot that aired throughout the market.” CATA UP TO SPEED 9
The CATA is pleased to name two new charities as benefactors of the First Look for Charity: Folds of Honor and Violet Foundation for Pediatric Brain Cancer. The First Look for Charity black-tie gala takes place on the Chicago Auto Show floor the night before it opens to the public, and the proceeds annually generate at least $2 million for 18 local charities. Benefiting charities are named by the CATA board of directors and are brought into the program for a nine-year term, at which time they can either be renamed by a member of the CATA board or a new charity is nominated to participate in the program. This year, two vacancies allowed for the dealer organization to name beneficiaries who have not yet participated in the program. Newly elected CATA board member Jared Wickstrom of Dick Wickstrom Chevrolet nominated Folds of Honor, and the collective CATA board of directors nominated the Violet Foundation for Pediatric Brain Cancer to join the beneficiary lineup. Folds of Honor is a 501(c) (3) nonprofit organization that provides educational scholarships to the spouses and children of U.S. military service members and first responders who have fallen or been disabled while serving our country and communities. Their educational scholarships support private school tuition or tutoring in grades K-12, tuition for college, technical or trade school and post-graduate work, including a master’s degree, doctorate or professional program. Funds for a second bachelor’s degree or trade/technical program certification are also available. Since its inception in 2007, Folds of Honor has awarded more than 52,000 scholarships totaling about $244 million in all 50 states. Among the students served, 45% are minorities. It is rated a four-star charity by Charity Navigator and Platinum on Candid. It was founded by Lt. Col. Dan Rooney, the only-ever F-16 fighter pilot (with three combat tours in Iraq) and PGA professional. He is currently stationed at Headquarters Air Force Recruiting Service Detachment 1 at Joint Base San Antonio-Randolph, Texas. “We are grateful to CATA and Dick Wickstrom Chevrolet for the inclusion in First Look for Charity and the generous contribution that will benefit our recipients,” said Lt. Col. Dan Rooney, founder and CEO of Folds of Honor. “These funds will provide life-changing academic scholarships to families who have sacrificed so much and deserve and need our help.” The Violet Foundation for Pediatric Brain Cancer was founded in 2022 by the local Chicago Napleton family following the death of their 3-year-old daughter Violet, the Foundation’s namesake. The Violet Foundation is dedicated to funding critical research and supporting families whose child is being treated for a brain tumor. Since their founding, they have supported more than 100 families in the fight and funded 12 research projects around Two New First Look for Charity Beneficiaries Named Folds of Honor and Violet Foundation for Pediatric Brain Cancer Join the Roster of 18 Benefiting Charities CATA UP TO SPEED 11
the world to develop more effective treatments for children diagnosed with this terrible disease. “We’re honored and excited to be a part of the First Look for Charity,” said Violet Foundation Co-Founder Steve Napleton. “Brain cancer is responsible for more childhood deaths than any other disease, and the money we will raise through the First Look will make a real impact in pediatric brain cancer research.” Since its inception, the Chicago Auto Show’s First Look for Charity has raised more than $63 million for participating local charities. The CATA and new-car dealers also support charities year-round through a program called Chicagoland Dealers Care. Chicagoland Dealers Care helps match donations made by CATA dealer members to charities within their communities. “We are excited and honored to bring both of these wonderful charities into the First Look for Charity event,” said CATA Board Member and First Look for Charity Chair Emir Abinion. “I speak on behalf of all new-car dealers when I say that charitable giving and supporting organizations like these who do such crucial work, not only in Chicagoland but around the country, is extremely important to us. We take pride in putting on the First Look for Charity gala every year, which raises millions of dollars for these 18 organizations – a fundraiser unlike any other in Chicago.” The full listing of 2025 First Look for Charity beneficiaries include: 100 Club of Illinois; Advocate Health Care; ALS United Greater Chicago; Ann & Robert H. Lurie Children’s Hospital of Chicago; Boys & Girls Clubs of Chicago; Cal’s Angels; Folds of Honor; Franciscan Community Benefit Services; Glenwood Academy; Habitat for Humanity; Jesse White Tumbling Team; Lydia Home & Safe Families for Children; Misericordia; Sertoma Star Services; Special Olympics Illinois; Susan G. Komen, Chicago; Turning Pointe Autism Foundation; and Violet Foundation for Pediatric Brain Cancer. The 2025 First Look for Charity is set to take place on Friday, Feb. 7 at McCormick Place. For more information, please visit firstlookforcharity.org. For details about the CATA’s Chicagoland Dealers Care program, visit chicagolanddealerscare.com. 12 CATA UP TO SPEED
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The Chicago Auto Show is proud to announce the appointment of two new show contractors who will be supporting the 2025 Chicago Auto Show to be held Feb. 8-17 at McCormick Place. Event Design Group has been named as the General Show Contractor and will assist show producers with event logistics, including freight, décor, carpentry and the associated labor needed to deliver those services. Prime Electrical and Exhibition Services (Prime EES) has been named as the primary show utility contractor supporting all electrical and plumbing needs. The unique combination of these two contractors is designed to bring efficiency and cost savings to Chicago Auto Show exhibitors and partners of the show. Event Design Group is a women-owned company founded in 2013 and has a rich 35 years in general contracting and labor services with extensive experience in the automotive and trade show event space. It brings more than 500 years of collective auto show experience across their staff team which has been tailor-made for the Chicago Auto Show. Event Design Group is committed to the success of the Chicago Auto Show by providing high-touch services, including freight logistics, labor management, show décor design and installation, carpeting, furniture and floral, project management and material handling services. A Chicago-based company, Prime EES brings more than 100 years of combined experience to the Chicago Auto Show team. Prime EES is equipped with the knowledge and network to offer cost-effective solutions for all show electrical, plumbing and rigging needs. Though Prime EES is a new electrical contractor of the show, their parent company, Absolute Productions, has been the show’s audio/visual production provider for more than 10 years. “It was a strategic decision to bring in a partner like Event Design Group, as its management team has its roots founded in experiential/display houses who worked for our manufacturer exhibitors,” said Chicago Auto Show General Manager Jennifer Morand. “In a sense, Event Design Group is approaching our show from the client perspective and is inherently familiar with our customers’ needs.” “Prime EES is also a natural fit from the utility contractor aspect with its team’s extensive knowledge of doing events and business at McCormick Place,” said Chicago Auto Show Director of Show Operations Chris Konecki. "This dual-contractor model is our innovative approach to helping reduce pricing for our exhibitors while still providing high-level service for both our exhibitors and show sponsors. We’re confident in their collective abilities to not only produce a high quality event like the Chicago Auto Show but also innovate alongside our team and take the show to the next level.” The 2025 Chicago Auto Show public event will take place Feb. 8-17 at McCormick Place. The Media Preview dates are Feb. 6-7, and the First Look for Charity black-tie gala will be held the evening of Feb. 7. Tickets for the 2025 Chicago Auto Show and First Look for Charity gala are on sale now at ChicagoAutoShow.com. Chicago Auto Show Appoints New Show Contractors for 2025 Show 14 CATA UP TO SPEED
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Introduction Your dealership likely has segments of target customers for your service department. There are new vehicle buyers to consider, along with existing clientele and conquest customers all on your radar. However, you might be missing out on an important segment of drivers who deserve your attention, those with high-mileage vehicles. There are common and often underutilized upsell opportunities for customer pay (CP) work for cars with over 60,000 miles, as keeping a high-mileage vehicle on the road requires much more attention to scheduled and preventative maintenance than models with fewer miles. In our experience on service drives across the country, many service departments aren’t set up in a way that has the most experienced service advisor taking care of these vehicles. This presents an opportunity for your service department and Fixed Ops profitability that your dealership should be taking advantage of. Methodology Dynatron’s database includes repair order (RO) information from dealerships across North America. To formulate this report, we were able to analyze ROs from vehicles over 60,000 miles to create two different bar graphs. The first graph includes data from over 27 million ROs to show the increase in dollars per RO based on the age of Hidden Opportunity of High Mileage Vehicles in the Service Drive Why One-Line Repair Orders are Eliminating Extra Revenue! By Leigh Silver, Chief Executive Officer, Dynatron a vehicle. The graph begins with new vehicles and ends with vehicles 10 years and older. The second graph shows the percentage of One-Line ROs dealerships had in Q1 2024. The number of One-Line ROs directly represents potential missed opportunities for selling more on the service drive. Results: Dollars Per RO and One-Line RO Counts for Each Dealer RESULTS: DOLLARS PER RO VS. VEHICLE AGE RESULTS: ONE-LINE RO COUNTS Do you know how many of your ROs have only one line? Here’s how your performance compares to the 27 million ROs we analyzed: • 50% or more of your ROs with one line is poor performance. • 50-38% of your ROs with one line is average performance. • 38% or less of your ROs with one line is excellent performance. If more than 38% of your ROs are one line, there is a huge revenue opportunity to be taken advantage of! CATA UP TO SPEED 17
Conclusion High mileage vehicles present a hidden revenue opportunity because those are the ones that need the most attention, but those vehicles come through express lanes manned by the least experienced techs, resulting in One-Line ROs. You don’t realize these are the most valuable customers, and you’re presenting them with your least skilled salesmen resulting in low dollars per RO. Mileage awareness is the concept of a service department manager determining which service advisors and technicians should be handling certain vehicles based on their mileage, instead of customers determining who writes up their vehicle based on the door they drive through. When considering high-mileage vehicles, you want not only a technician knowledgeable enough to perform maintenance and repairs but also someone with great selling skills. After all, service IS sales! Dynatron Software has customizable reporting insights paired with service advisor training from our coaches that can help a dealership of any size take advantage of the high-mileage vehicles that come through their service drive. Dynatron knows fixed ops profitability, do you? Get in the know with Dynatron by scanning the QR code. https://go.dynatronsoftware.com/cata Leigh Silver is the chief executive officer of Dynatron Software. He brings nearly 20 years of experience in automotive technology and is seen as a thought leader in the automotive industry. Analysis • The average RO cost for vehicles 10 years and older is 96% higher than vehicles 1 year old or less. • After a vehicle’s age reaches 9 years old, the average RO cost increases by 20.8% in year 10. KEY TAKEAWAYS We know as vehicle age increases, the cost of ownership also increases, as highlighted by the first graph. With that correlation in mind, we can look at the second graph to see how One-Line ROs on high-mileage vehicles in particular can leave significant revenue on the table. The goal is to have the least amount of One-Line ROs as possible. When this is properly addressed in your service department, the hours per RO increase when your advisors sell more. This directly impacts dollar value with parts and labor, automatically improving several performance metrics just by reducing One-Line ROs. Does your DMS generate a One-Line RO report? If not, Dynatron Software can help! Our reporting technology has the ability to provide reports like the example below showing One-Line ROs specifically for high mileage vehicles. Discussion Over time as the aftermarket gained popularity, the automotive industry introduced (and even mandated in some cases) installing express lube operations within the service department. This resulted in having separate express and main shops, also splitting up talented service advisors and technicians. Customers coming in for basic “express” services such as an oil change are being seen by newer and less experienced technicians, whereas the more seasoned techs are performing diagnoses and repairs in another service drive. The problem with the divide of express operations is that less experienced technicians are writing up high-mileage vehicles without recommending additional preventative or diagnostic services. The seasoned technicians in the “main” service department are primarily doing recalls and warranty work. The purpose of competitively priced lube, oil and filter, and express services is to get people in the door, but many dealerships aren’t properly capitalizing on the opportunity to upsell them. This is especially true with high-mileage vehicles. The solution is about maximizing the knowledge and talent you have in your service drive. Once a manager recognizes the missed opportunities, the entire department can get on the same page regarding the significance of the different mileage bands. From there, a process can be developed and implemented to route cars in various mileage bands to certain technician talents. When considering high-mileage vehicles, you want not only a technician knowledgeable enough to perform maintenance and repairs but also someone with great selling skills. 18 CATA UP TO SPEED
© 2024 Truist Financial Corporation, TRUIST, Truist purple and the Truist logo are service marks of Truist Financial Corporation. All rights reserved. Truist Securities is the trade name for the corporate and investment banking services of Truist Financial Corporation and its subsidiaries. Securities and strategic advisory services are provided by Truist Securities, Inc., member FINRA and SIPC. | Lending, financial risk management, and treasury and payment solutions are offered by Truist Bank. | Deposit products are offered by Truist Bank, Member FDIC. We’re more than a financial partner. We’re an invested one. True relationships matter. We don’t take this lightly. The best are built on a deep understanding of your short- and long-term goals and always backed by thoughtful, strategic advice in support of your vision. With full-service financial solutions and a deep bench of industry expertise, we’ll build a team around your organization to focus on your success. So, let’s drive further—together. To learn more, visit us at Truist.com/DealerServices.
Dealers Renew Focus on F&I Profit Participation Strategies Learn What Steps Auto Dealers Can Take to Find the F&I Profit Program That Best Meets Their Goals By Truist Dealer Services, in partnership with Matt Joffe, Managing Shareholder for Total Warranty Services As profit margins return to historical levels, auto dealers are looking for ways to generate additional earnings. Dealer finance and insurance (F&I) profit participation programs are often overlooked in the quest to boost profits — an expensive oversight. These established strategies can provide dealers with solid cash flows and investment returns. While many dealerships already have profit-sharing programs in place, these programs often fall short of a dealer’s goals. And dealers can miss their full profit potential if warranty programs aren’t aligned with their business and personal wealth goals — or if they aren’t optimally executed. F&I profit participation programs can support a dealership in: • Generating cash flow. • Funding acquisitions. • Managing tax strategies. To varying degrees, the programs can be used to: • Provide incentives and rewards to key management. • Establish a vehicle for wealth building and estate planning. • Support multi-generational succession and business transition. The Range of F&I Profit Participation Programs F&I profit programs vary greatly in structure, economics, flexibility, risk and tax consequences. To find the best fit for your situation, you’ll want to understand each type and its ability to deliver what your business, transition plan and personal wealth strategy demand. Program How It Works Key Features What It Achieves U.S. Federal Income Tax Consequences Guaranteed Retro Dealer receives commission for sale of F&I product plus guaranteed underwriting profit. Guaranteed flat dollar amount per contract (varies based on product and sales mix). Payment is based on contract count net of cancellations (not based on loss ratios). Not subject to losses. Accelerated cash flow. Upfront underwriting. Don’t have to set up reinsurance company. Taxed as ordinary income for Federal Income Tax purposes at 37% for individuals. However, the Tax Cuts and Jobs Act (TCJA) may allow a deduction of up to 20% of the income if paid to an S Corp or LLC taxed as a partnership. Participating Retro Dealer receives commission for sale of F&I product, plus underwriting and investment income. Dealer does not have to invest in or open a reinsurance company. Dealer must recognize revenue as received. Historically, all upside, no downside. Highest cash flow program. No reinsurance required. 100% of underwriting profits and any investment income that is available. Taxed as ordinary income for Federal Income Tax purposes at 37% for individuals. However, the Tax Cuts and Jobs Act (TCJA) may allow a deduction of up to 20% of the retro income if paid to an S Corp or LLC taxed as a partnership. 20 CATA UP TO SPEED
Program How It Works Key Features What It Achieves U.S. Federal Income Tax Consequences Reinsurance Through Controlled Foreign Corporation (CFC) or Domestic Captive Dealer receives commission for sale of F&I product, plus underwriting and investment income in dealer-owned reinsurance company. Dealer participates in risk of loss through a wholly owned reinsurance company. Options for domicile of reinsurance company. Dealer controls program. Dealer hires an investment manager. Assets set aside for losses (A account). Earned income separately invested and controlled by dealer (B account). Funds held at U.S. banking institutions. Cost for setup, annual tax preparation and license renewal, and reserves/funding. High level of control over the program, allowing tailoring of investment options to meet various dealer objectives. Efficient tax vehicle. Dealer directs investment of earned funds in trust and receives investment income. Treated as a U.S. Company for ALL federal income tax purposes. For tax years beginning after 12/31/2016, with a total annual net written premium up to $2.8 million, tax on investment income only at 21% corporate rate under TCJA (irrevocable election is required to be taxed on investment income only). If total annual premium exceeds $2.8 million, regular corporate income tax applies on ALL underwriting and investment income at 21% corporate rate, and a second layer of tax at the shareholder level once distributed at 23.8% (20% capital gains rate plus 3.8% Medicare NIIT). Domestic Captive Insurance Company Same as reinsurance company, but company is 100% U.S. based. Same as reinsurance company. Obligor Structures Dealer receives commission for the sale of certain F&I product, plus underwriting and investment income in dealer-owned obligor company. Dealer-owned company is obligated party to perform on any losses (not administrators). Dealer pays administration and claim processing fees. Dealer is responsible for maintaining reserves. Contractual liability policy may be required. No reinsurance required. Dealer keeps all funds received, less administration and claim processing fees. Obligor will be treated as a C corporation for U.S. Federal Income Tax purposes, subject to double taxation regime of IRC Subchapter C. Retail price to consumer (as opposed to reserve) counts against $2.8 million USD cap under Section 831(b). If premiums exceed $2.8 million annually, company is fully taxable on underwriting and investment income from first dollar. Initially generates tax losses because a 100% deduction is allowed for amounts above reserve (F&I commission, management money, etc.), and reserves earn over the life of the VSC, subject to the 20% UEP “haircut.” Eventually, all underwriting and investment income is subject to tax at 21% corporate rate (on a deferred basis), and shareholders will be taxed a second time upon distribution from the company (double taxation). Distributions/liquidations taxed at long-term capital gains rate of 23.8% (20% capital gains rate, plus 3.8% Obamacare tax). No premium tax is paid if no CLP required. "As part of your planning, F&I and reinsurance can be invaluable tools that expand your options for dealership transition and succession planning." CATA UP TO SPEED 21
Program How It Works Key Features What It Achieves U.S. Federal Income Tax Consequences Hybrid Structures Dealer receives commission for sale of F&I products plus underwriting and investment income through a combination of participating structures. Hybrid structures allow programs to be built to achieve specific dealer objectives. May be set up for partners, key associates or family members. Split business among a combination of participating retro/CFC. Customized. Varies. A Strong Advisory Team Can Craft a Plan That Best Fits Your Goals Determining the right F&I approach requires having the right advisory team in place. Anchor your search with a strong team of specialized experts who can help you hone in on your specific objectives and identify a profit participation program that best meets those goals. Your team should include trusted individuals who bring insights and informed perspectives from many angles, including: • An F&I program provider who can bring numerous options to the table and is prepared to tailor a formula to your needs. • A tax advisor with a keen understanding of the tax code — current laws, in addition to clear projections for how future tax updates — including the sunset of provisions of the TJCA that may impact the direction you take. • A CPA who fully grasps how your strategy affects your business finances and impacts dealership valuation. • An attorney who has the experience to advise you on how to structure your program legally for maximum effect and resilience. • A banking advisor who can set up appropriate accounts and structure trusts for your plan. Flexibility is Key To Implementing an Effective Long-Term Strategy Change is a constant for your business. From evolving tax laws and fluctuating business cycles to market swings and macroeconomic ebbs and flows, external forces that affect your dealership are constantly shifting the playing field. Your goals and plans change over time as well, so your profit participation program shouldn’t be set in stone. Make ongoing conversations about your current F&I plan a priority — the effectiveness of your strategy can diminish if it remains static. It’s essential for dealers to work with a program provider that brings multiple options and a proactive mindset — a partner who’s prepared to adapt your approach to address your changing needs. Your advisory team should meet regularly to assess the status of your plan (quarterly or semi-annually is ideal). That includes discussing any changes to your objectives and examining any shifts in the broader business landscape or economic environment that might impact your dealership. Your strategy can provide meaningful earnings to support overall dealership profits or help meet your targets. Depending on your course of action, F&I profit participation can impact the timing of your business cash flow. As part of your planning, F&I and reinsurance can be invaluable tools that expand your options for dealership transition and succession planning. Special thanks to Matt Joffe, managing shareholder for Total Warranty Services (TWS). TWS specializes in creating customized F&I programs including vehicle service contracts, as well as all ancillary protection products. The TWS participation team can provide a customized underwriting participation program to fit each client’s unique goals. TWS has worked with over 1,600 auto dealerships and is one of the nation’s top 10 largest F&I product providers with over $1.5 billion in written premium and over seven million contracts sold. To find out more about how TWS can help your dealership, contact Matt Joffe at mjoffe@totalwarrantyservices.com. Truist Bank, Member FDIC. ©2024 Truist Financial Corporation. Truist, the Truist logo and Truist Purple are service marks of Truist Financial Corporation. Equal Housing Lender. 22 CATA UP TO SPEED
Anticipate every turn In an industry that’s always evolving, your dealership can rely on our Dealer Financial Services team’s 90 years of experience to see what’s around the corner, forward-thinking insights to prepare you, and technology to keep you ahead of the curve. What would you like the power to do?® Brad Bartsch, bradley.w.bartsch@bofa.com Tony Garcia, anton.r.garcia@bofa.com Diana Zamudio, diana.zamudio@bofa.com business.bofa.com/dealer ©2024 Bank of America Corporation. All rights reserved. 5949042 12-23-0324 Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value “Bank of America” and “BofA Securities” are the marketing names used by the Global Banking and Global Markets divisions of Bank of America Corporation. Lending, derivatives, other commercial banking activities, and trading in certain financial instruments are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Trading in securities and financial instruments, and strategic advisory, and other investment banking activities, are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, BofA Securities, Inc., which is a registered broker-dealer and Member of SIPC, and, in other jurisdictions, by locally registered entities. BofA Securities, Inc. is a registered futures commission merchant with the CFTC and a member of the NFA. Anticipate every turn In an industry that’s always evolving, your dealership can rely on our Dealer Financial Services team’s 90 years of experience to see what’s around the corner, forward-thinking insights to prepare you, and technology to keep you ahead of the curve. What would you like the power to do?® Brad Bartsch, bradley.w.bartsch@bofa.com Tony Garcia, anton.r.garcia@bofa.com Diana Zamudio, diana.zamudio@bofa.com business.bofa.com/dealer ©2024 Bank of America Corporation. All rights reserved. 5949042 12-23-0324 Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value “Bank of America” and “BofA Securities” are the marketing names used by the Global Banking and Global Markets divisions of Bank of America Corporation. Lending, derivatives, other commercial banking activities, and trading in certain financial instruments are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Trading in securities and financial instruments, and strategic advisory, and other investment banking activities, are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, BofA Securities, Inc., which is a registered broker-dealer and Member of SIPC, and, in other jurisdictions, by locally registered entities. BofA Securities, Inc. is a registered futures commission merchant with the CFTC and a member of the NFA.
BROWN & BROWN Overview Brown & Brown Dealer Services (BBDS) is an F&I performance company aimed at helping to build tailored solutions for today’s vehicle retailer. The complexities inherent to the F&I business demand a white glove approach with the flexibility to satisfy a variety of brands or markets. The BBDS network of providers helps ensure the proper F&I program is developed and executed to help maximize upfront sales and profits, provide a top-tier customer ownership experience and create wealth-building opportunities downstream. How We Can Help Our BBDS team is comprised of experienced and knowledgeable F&I specialists that have worked with dealers for decades. They are equipped with access to the industry’s top product providers, a top-rated training and development program and commercial insurance products to help you find solutions to fit your business needs. F&I Products • Flexibility to help fit your needs • Access to A-rated providers • Two in-house administration companies • Wealth-building opportunities on products Training Solutions • F&I Management Certification School • Learning Management Systems (LMS) delivering online training • Monthly webinars and video training archive • Ethics & Compliance Certification Participation Programs • Program selection based on your goals and objectives. NCFC, CFC, Retro or DOWC • Nationally recognized team that specializes in evaluating and configuring personalized solutions • No obligation evaluation of your current program Property & Casualty • More markets for your risks mean more choices to help meet your individual business and personal needs • Knowledgeable professionals to help identify your unique risks and find solutions to help protect your assets Employee Benefits • We can help you build an effective benefits strategy • Health Collective Purchasing Arrangement that includes a dedicated service representative to help you with premium savings, national and regional coverage and to help make the administration of your plan more efficient DEALER SERVICES The Broker for the Dealer Custom F&I Programs That Help Deliver Results and Profits Brown & Brown Dealer Services 263 Shuman Blvd. • Naperville, IL 60653 | bbrown.com | (847) 612-9361 Overview Brown & Brown Dealer Services (BBDS) is an F&I performance company aimed at helping to build tailored solutions for today’s vehicle retailer. The complexities inherent to the F&I business demand a white glove approach with the flexibility to satisfy a variety of brands or markets. The BBDS network of providers helps ensure the proper F&I program is developed and executed to help maximize upfront sales and profits, provide a top-tier customer ownership experience and create wealth-building opportunities downstream. How We Can Help Our BBDS team is comprised of experienced and knowledgeable F&I specialists that have worked with dealers for decades. They are equipped with access to the industry’s top product providers, a top-rated training and development program and commercial insurance products to help you find solutions to fit your business needs. F&I Products • Flexibility to help fit your needs Training Solutions • F&I Management Certification School • Learning Management Systems (LMS) delivering online training • Monthly webinars and video training archive • Ethics & Compliance Certification Participation Programs • Program selection based on your goals and objectives. NCFC, CFC, Retro or DOWC • Nationally recognized team that specializes in evaluating and configuring personalized solutions • No obligation evaluation of your current program Property & Casualty • More markets for your risks mean more choices to help meet your individual business and personal needs • Knowledgeable professionals to help identify your unique risks and find solutions to help protect your assets Employee Benefits • We can help you build an effective benefits strategy • Health Collective Purchasing Arrangement that includes DEALER SERVICES The Broker for the Dealer Custom F&I Programs That Help Deliver Results and Profits This magazine is designed and published by The newsLINK Group LLC | (855) 747-4003 18W200 Butterfield Rd., #096 Oakbrook Terrace, IL 60181
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