As a car dealer, you work hard to make sales. You reassure every customer that you have the vehicle that will fit their needs and walk them through the purchasing process. After all of this effort, you deserve to reap the benefits of your labour.
Unfortunately, a bad credit card processing deal can prevent you from doing so. These problematic agreements often cause more problems than they resolve. From frustrating billing processes to expensive fees, car dealerships can suffer mightily from the wrong agreement.
However, many businesses have no choice but to accept credit card payments, as customers need them to complete their purchases.
So how do you ensure that you get the right terms for your business? You just have to know what to seek out and what to avoid. This article will help you learn the difference. It outlines three of the most common ways bad processing deals hurt car dealerships, as well as one proven solution that will help your business prosper.
Processing Fees Can Wipe out Your Profits
It’s a poorly kept secret that car dealers make tiny profits off each vehicle they sell. Sure, these numbers vary depending on the type of automobiles that you sell, but unless you’re in the luxury market, you probably end up making about $1,000 to $2,500 per sale. As a result, your business doesn’t have a lot of wiggle room when it comes to expenses.
That’s why excessive processing fees can be the bane of your existence. Merchant services providers usually charge between one and two percent of a client’s monthly sales volume for their services. If you let customers pay for entire orders on credit, these fees will eat through your profits like acid eats through metal.
Try to get a low rate when you negotiate for a payment processing deal. If you only let customers pay for part of their order on credit, you’ll prevent fees from impinging on your profits.
Hidden Fees Can Complicate Your Budgets
Processing fees aren’t the only charges you have to monitor. Processors often charge merchants to cover extra costs. Some of these fees, such as administrative and paper charges, are unavoidable. However, they can still raise your monthly bill and ruin your carefully maintained budget.
Be wary of these charges in the first month of your payment processing agreement. Afterwards, it may be easier to anticipate that amount you’ll need to set aside to cover these fees. It’s difficult to avoid these costs entirely, but the right planning can help you mitigate the damage they cause.
Chargebacks Can Destroy Your Reputation
Chargebacks raise huge red flags for payment processors and other merchant services providers. They signal that a business is bad news, but they affect car dealerships more than most other companies.
Dealers sell expensive merchandise at low profits, so a chargeback is more likely to cause these merchants to default on their accounts. This can lead to further penalties, some of which may prevent you from accessing other services.
The only way to prevent these problems is to avoid chargebacks at all costs. Make sure your merchant account can offset any potential losses, and once again, don’t let customers pay for an entire order on credit.
There’s a Better Way
Even constant vigilance can’t protect you from certain processing problems. That’s why you should seek an all-inclusive pricing plan.
These deals offer flat monthly rates with no additional fees. Your monthly statements will remain clean and understandable, and you’ll also get $1,000 worth of chargeback security. You won’t find a better value for car dealers anywhere else.