RevUpX Insights

Auto Dealership Credit Card Processing Fees: An Audit Guide for 2025

Written by RevUpX | Jan 10, 2025 7:28:04 PM

For auto dealerships, credit card processing fees can significantly impact profitability, especially given the high-ticket, low-margin nature of the industry. With transaction fees typically ranging from 1.5 to 3.5 percent, dealerships can lose thousands of dollars every month. 

Auditing your dealership’s credit card processing fees is critical to ensuring you’re not overpaying and that your payment processing setup is aligned with your business goals. 

Here’s a step-by-step guide to help get started:

1. Gather Documentation

Start by collecting all relevant documents, including:

  • Monthly merchant statements (at least six to 12 months of data).

  • Your processing agreement or contract.

  • Any fee schedules provided by your processor.

Having a complete set of documentation enables you to track patterns, identify irregularities, and understand your actual processing costs.

2. Understand Key Components of Credit Card Fees

Credit card processing fees have three main components—familiarizing yourself with them helps you understand where your money goes:

  • Interchange Fees are set by card networks (e.g., Visa, Mastercard) and are non-negotiable. They range based on the type of transaction and card.

  • Assessment Fees are established by card brands, these are also non-negotiable.

  • Processor Markups are charged by your payment processor, which can vary significantly and are negotiable.

3. Analyze Monthly Statements

When reviewing your statements, focus on these key areas:

  • Calculate Your Effective Rate: Divide your total fees by your total processing volume to get your total percentage cost. This helps you compare your costs to industry benchmarks.

  • Identify Hidden Fees: Look for less obvious charges, such as
    • PCI non-compliance fees
    • Statement fees
    • Annual fees
    • Monthly minimum fees
    • Early termination fees

  • Carefully Review Downgraded Transactions: Check if many transactions are being downgraded due to processing errors or non-compliance. These often result in higher fees.

Our blog The Hidden Costs of Traditional Credit Card Processors: What Auto Dealers Need to Know delves further into the details of hidden processing fees.

4. Evaluate Your Pricing Model

Understanding your current pricing model and whether it aligns with your dealership’s specific needs is crucial. Different pricing structures can significantly impact your bottom line depending on your transaction volumes, average ticket sizes, and business model. Here are three of the most common:

  • Tiered Pricing groups transactions into “qualified,” “mid-qualified,” and “non-qualified” categories, which, due to associated fee bundling, can lead to higher costs.

  • Interchange-Plus Pricing offers greater transparency, showing the interchange fee plus a processor markup.

  • Flat-Rate Pricing is predictable and commonly used by smaller businesses. It provides simplicity but often at a higher cost.

For a more in-depth discussion of pricing models, check out The Hidden Costs of Traditional Credit Card Processors: What Auto Dealers Need to Know

5. Identify Opportunities for Cost Savings

After analyzing your processing statements and understanding your pricing model, the next step is identifying and implementing strategies to reduce costs. Here are a few to start with:

  • Negotiate Processor Markups: Renegotiate the markup portion of your fees if it seems excessive. Use your processing volume as leverage in negotiations and consider consolidating multiple locations under a single processing agreement for better rates.

  • Optimize Card Acceptance Policies: Encourage policies such as debit card usage, cash discount or surcharge programs, and minimum transaction amounts for credit card payments.

  • Upgrade Equipment and Technology: Ensure your point-of-sale (POS) systems support secure and efficient transactions, reducing the risk of costly downgrades.

  • Ensure PCI Compliance: Avoid non-compliance fees by adhering to Payment Card Industry (PCI) standards.

  • Implement Zero-Fee Credit Card Processing: Consider introducing a zero-fee credit card processing model by utilizing surcharge or cash discount programs. These programs enable you to offset processing costs by passing them on to customers in a compliant manner.

6. Benchmark Against Industry Standards

Compare your effective rate against industry averages. Higher rates may indicate opportunities for optimization or the need to switch processors.

That said, rates can vary based on your dealership’s size, transaction volume, and department mix (sales, service, parts). So, when benchmarking, be sure to factor in your specific business model and market position.

When rates consistently exceed industry standards, take a close look at your processor’s markup structure, transaction downgrade patterns, and any hidden fees that might be inflating your costs. 

Additionally, consider whether your current processor truly understands the unique needs of auto dealerships, as specialized expertise can make a meaningful difference in optimizing your processing costs.

7. Seek Expert Assistance

While conducting internal audits is valuable, partnering with a payment processing expert can provide additional insights and savings opportunities. This can include third-party auditors or a provider who offers specialized expertise in dealership payment processing and transparent pricing, such as RevUpX.

RevUpX brings over 100 years of combined experience working with industry giants like American Express, Fiserv, and CardConnect. Their zero-fee credit card processing program helps dealerships eliminate processing fees while maintaining high service levels and ensuring compliance with all regulations.

Key benefits of partnering with RevUpX include:

  • Customized solutions aligned with dealership needs.

  • Strategic partnerships with industry leaders.

  • Comprehensive compliance support.

  • Free processing equipment.

  • Dedicated implementation assistance.

Also, for more on selecting the right payment processor for your dealership, see Why Your Payment Processor Matters (Not All Payment Processors Are Created Equal).

8. Monitor Fees Regularly

Make fee monitoring a priority in your dealership’s financial management strategy. A simple but consistent approach to auditing your processing fees can prevent thousands of unnecessary costs from eating into your profits over time.

Implement a regular audit schedule (quarterly or semi-annually) to ensure your fees remain competitive and align with your processing agreement. This proactive approach helps identify issues early, maintains transparency with your processor, and ensures you’re not caught off guard by gradual fee increases or unexpected charges.

FAQs on Dealership Credit Card Processing Fees

Finally…

Auditing your credit card processing fees is not a one-time task. By consistently reviewing your statements, understanding the components of your fees, and negotiating effectively, you can save your dealership thousands of dollars annually while maintaining a robust payment processing setup.

Contact RevUpX today to learn more about their transparent pricing, zero-fee processing solutions, and how their expert team can help your dealership better manage processing costs and boost profitability.