What Protective gained when it bought U.S. Warranty

When Protective Asset Protection’s parent acquired U.S. Warranty Corp. last year, the purchase came with a value proposition: expertise in helping dealers design their own F&I products.

U.S. Warranty established the set-up, administration and management of dealer owned warranty companies as one of its core products. The acquisition enables Protective Asset Protection to add dealership-customized F&I products to its roster.

“It can be [dealerships’] own customized service contract, their own reimbursement rates, how much do they want to be paid for parts, service,” said Scott Karchunas, president of Protective Asset Protection. “It’s their warranty company from top to bottom” rather than just a private label.

The dealership owns the warranty company and hires Protective to manage it. Dealers typically partner with the automaker or a company such as Protective to write their products.

“Very few players in our business have this concept and even fewer execute it with the precision of the U.S. Warranty team,” Karchunas said.

The U.S. Warranty acquisition was more about value than expansion, he said. “There’s a scale acquisition. You buy to get bigger and spread your cost around, and there’s a value acquisition, where you add best of breed products and services to your platform. This was a value acquisition.”

As dealerships consolidate and larger dealership groups form, Protective wanted to have a program that meets dealership groups’ desire to have a custom set of F&I products, Karchunas said.

Improved loyalty

The product also builds brand loyalty with the consumer. “When the car breaks down, the customized, branded contract encourages customers go back to the dealership,” said Rick Kurtz, senior vice president of distribution for Protective Asset Protection.

Nearly all of U.S. Warranty’s dealership customers had the product, he said. “That was their way into the market.”

Typically, if customers are shopping for a Honda Accord, for example, Kurtz said, they may contact a handful of Honda dealers to find the best price. Next time they are in the market, they’ll go through that process all over again.

But with a dealer owned warranty, a customer may go only to the sole dealership that offers certain F&I products.

“It’s about the user experience. If the user experience is positive, they’re just going to go back to that dealer because they want to replicate that experience,” Kurtz said.

Awareness

Protective plans to expand the dealer owned warranty business “as we leverage the marketing and distribution that we already have,” Karchunas said.

U.S. Warranty didn’t do much advertising; awareness was spread through word-of-mouth, Kurtz said.

The dealer owned warranty program is “getting a little attention now that a larger company invested in this platform,” he said. “Our ability to create awareness for this from coast to coast is going to really allow us to aggressively grow.”