Credit card processing fees can take a substantial bite out of your auto dealership's profits. With these fees typically ranging from 1.5% to 3.5% per transaction, costs can accumulate quickly, especially for high-ticket items such as vehicle sales and major repairs.
However, a well-implemented surcharge program can significantly reduce or eliminate these fees, transforming what was once a substantial expense into a neutral cost factor for your business while maintaining payment flexibility for your customers.
Understanding the Impact of Credit Card Processing Fees
Credit card processing fees are the costs businesses incur to accept card payments, typically covering the services provided by banks, card networks, and payment processors to facilitate each transaction. They include:
- Interchange Fees: These often comprise the bulk of processing fees and go to the card-issuing bank, such as Chase, Citi, or Bank of America, for managing cardholder payments.
- Assessment Fees: These fees go to card networks, such as Visa, Mastercard, Discover, and American Express, to cover their operating costs and are set by the networks themselves.
- Payment Processor Fees: These fees go to the processor, such as Fiserv, Square, or Stripe, which handles card payment logistics and, depending on the company, can be negotiable.
Understanding these components in context brings their impact into sharper focus. Take a typical month at a dealership, for example:
For a new vehicle sale of $40,000:
- At a 3% processing fee: $1,200 cost per transaction
- Monthly new car sales (15 units): $18,000 in processing fees
- Annual impact: $216,000 in processing costs
For service department transactions:
- An average repair bill of $500
- At a 3% processing fee: $15 per transaction
- Daily service transactions (20): $300 in processing fees
- Annual impact (assuming six business days per week x 52 weeks): $93,600 in processing costs
Combined, these fees could cost your dealership more than $309,000 annually—money that could be reinvested in your business or contribute directly to your profit margin.
How Surcharging Works
A surcharge program adds a percentage fee to credit card transactions to offset processing costs. For example, if a customer pays $50 for an oil change with a credit card, a 3.5% surcharge would result in a total charge of $51.75. This extra $1.75 covers your processing costs, effectively eliminating this expense from your operations.
Key benefits include:
- Mitigation or elimination of credit card processing fees
- Transparent fee structure for customers
- Payment flexibility for customers
- Improved control over operational costs
- Enhanced profitability without compromising service quality
Calculating Your Potential Savings
Every dealership's financial profile is unique, but the potential savings from a surcharge program can be substantial. By analyzing a few key metrics from your operations, you can quickly estimate the impact on your bottom line. This data-driven approach helps build a clear business case for implementing a surcharge program and provides concrete targets for financial improvement.
To estimate your potential savings, consider:
- Your monthly credit card transaction volume
- Average transaction amount
- Current processing fee percentage
For example, a dealership processing $500,000 monthly in credit card transactions with a 3% fee could save $15,000 per month or $180,000 annually with a properly implemented surcharge program.
Implementation Considerations
While the savings potential is substantial, successful implementation requires attention to several key factors:
- Legal Compliance: Surcharge programs are currently permitted in 48 states (excluding Connecticut and Massachusetts)
- Clear Communication: Proper signage and disclosure at entrances and points of sale are required
- Staff Training: Ensuring your team can effectively explain the program to customers is essential
- Unified Application: The same fee must apply to all credit card brands
Customer Impact & Management
Many dealerships worry about customer pushback, but with proper communication and implementation, most customers understand and accept surcharge programs. Some key points to emphasize with customers:
- The choice between payment methods remains theirs
- The fee applies only to credit card transactions
- Alternative payment methods (cash, debit) enable customers to avoid the fee
- The program enables the dealership to maintain competitive pricing
The RevUpX Advantage
Working with an experienced partner such as RevUpX ensures proper implementation and ongoing support for your surcharge program. Our team provides:
- Customized program setup tailored to your dealership
- Compliance guidance and support
- Staff training and educational resources
- State-of-the-art Clover terminals and CardPointe Gateway virtual terminals
- Ongoing program optimization and support
Take Action Today
Learn more about how RevUpX and our zero-fee credit card processing solutions can help you capture significant savings and boost profitability for your auto dealership. Our team of experts is ready to analyze your current processing costs and demonstrate how a surcharge program could benefit your bottom line.
Contact RevUpX today to explore how our tailored merchant services solutions can transform your auto dealership's payment processing and contribute to your profitability and growth.
