The Complete Guide to Automotive Reinsurance for Dealerships

As dealerships continue to evolve their F&I strategy, more principals and general managers are exploring dealer reinsurance not just as a profit tool but as a long-term wealth-building strategy. One of the most powerful tax advantages available within reinsurance is the 831(b) election, a provision in the U.S. tax code that allows qualifying insurance companies to be taxed only on their investment income, not the premiums they collect, up to a defined annual limit. For the 2025 tax year, the IRS has set the 831(b) premium cap at $2.85 million. This means that if your dealer-owned reinsurance company collects less than that amount in premium and meets certain compliance standards, it may qualify for this election. The relevant IRS language reads: “In the case of a qualifying insurance company, if the net written premiums (or, if greater, direct written premiums) for the taxable year do not exceed $2,850,000, the taxable income of the company shall be taxable only on income other th...

I want to discuss the basics of how to set up a reinsurance program . Many dealers have heard about reinsurance, but it can seem complicated or out of reach. Once you hit the right contract volume, getting started is straightforward. My goal here is to give you a clear roadmap from building your volume to choosing the right structure so you can move from leaving money on the table to building long-term wealth through reinsurance. Step 1: Building Your Volume (Start Where You Are) Reinsurance works best once your dealership is consistently writing about 20 to 25 service contracts per month. That volume gives you the scale needed for underwriting profits and investment income to build real wealth over time. If you are not there yet, that is okay. Many dealers start with a retro profit-sharing program. This allows you to share in profits immediately while you build toward full reinsurance. It serves as a stepping stone, keeping you engaged with the back end instead of leaving everything t...

Introduction: Why I Believe F&I Reinsurance Matters for Dealers Over the years, I have seen firsthand how F&I reinsurance can transform a dealership. What begins as a profit center in the finance office can become a long-term wealth engine when dealers take ownership of the underwriting profits from their F&I products. The key is understanding the different structures available and knowing which one fits your dealership’s size, goals, and future ambitions. Retro Profit Sharing Programs For many dealers I have worked with, retro profit sharing is the first step into profit participation. A retro program allows you to share in underwriting profits without having to form your own reinsurance company. It does not require upfront investment, which makes it a great introduction. While it is not as lucrative as other structures, it helps dealers start to see beyond just the monthly profit and toward long term potential. Controlled Foreign Corporation (CFC) A Controlled Foreign Co...

Introduction: Who I Am and Why I Started Elite FI Partners Michael Aufmuth | Elite FI Partners My name is Michael Aufmuth , and my journey in the automotive industry began back in 1997 at my family’s dealerships in Tucson, Arizona. I grew up in this business, working in sales, finance, and eventually general management, but I found my true passion in the finance office. For over 13 years, I have built and led F&I departments, focusing on process, profitability, and customer experience. Along the way, I even developed a dealer management system to streamline deal structuring, a project born out of my background in computer science. In 2013, my wife, Emilia, and I expanded into the vendor side of the business, training and developing F&I processes for Mazda and Volvo dealerships nationwide. That experience opened our eyes to the bigger picture. Dealers didn’t just need products; they needed partners who would stand beside them with training, coaching, and wealth-building strate...