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How it works
Extended Warranties are one of the largest profit centers for car dealers. This is a very basic breakdown of how they work, and how we change the game for you! Before we get started, it is important to know the four parties typically involved in the selling of extended warranties through car dealerships: the warranty company, the agency, the car dealership and the customer. Now, let's get started...
The following examples are for illustrational pursposes only
TYPICAL DEALER WARRANTY
WARRANTY DIRECT WARRANTY
Cost of Insurance $ 820
CLIP Fee $ 30
Administrative Fee $ 150
Agency Fee $ 300
Dealer Pack $ 200
Net Cost $ 1,500
Dealer Profit $ 2,000
Retail Cost to You! $ 3,500
Cost of Insurance $ 820CLIP Fee $ 30Administrative Fee $ 150Agency Fee $ 300Dealer Pack $ 200 Net Cost $ 1,300Dealer Profit $ 2,000
Retail Cost to You! $ 1,300
Retail Cost to You! $ 1,300
Explanation of the above costs
Cost of Insurance - This is the cost of the insurance, carried by the warranty company, to pay for warranty claims, made by the customer, while the warranty is in effect.
CLIP Fee - This is a "Contingent Liability Insurance Policy" carried through a different insurance company to pay claims, while the warranty is in effect, in the event the warranty company becomes insolvent or goes out of business.
Administrative Fee - This is the fee from the warranty company to administer all aspects of the warranty while it is in effect. This is their revenue.
Agency Fee - This is the fee charged by the agency that brings the warranty company and car dealership together to do business.
Dealer Pack - This is an arbitrary dollar amount chosen by the dealership owner(s) to create a pool of money for them to use as they see fit, whether for personal or business use. This number can differ greatly from dealership to dealership, and there is no limit to the number of packs that can be added, nor to the dollar amount of any given pack.
Net Cost - The sum of the: Cost of Insurance, CLIP Fee, Administrative Fee, Agency Fee and Dealer Pack. Up to this point the dealership has made no retail profit to count towards their backend sales revenue.
Dealer Profit - This is the backend retail profit made by the dealership from the customer on the sale of the warranty. This amount counts towards the dealership's backend sales revenue, and is the amount used to calculate the finance manager's commission.
Retail Cost - This is the sum of the Net Cost and Dealer Profit. It is the final price paid by the customer (excluding taxes if applicable.) This number is arbitrary and can differ greatly bewteen dealerships across the country.