Card processing is a tricky prospect for many companies. You need time and effort to find the right processor and to prepare an application. However, a retailer can accept credit and debit card payments once they receive approval, which could attract more customers and result in more sales.
If you’re a car dealer, though, this relationship is a little more complicated than usual. Card processing offers plenty of benefits, but it also poses risks. This is due in part to the unique nature of the business. Dealers sell big-ticket items, which can create problems for processors. Most firms set firm sales allowances, so if you can’t adhere to these limits, you may not be able to receive service.
In the end, payment processing is as necessary for car dealerships as it is for any other business. You just need to know how to get the best value for your purchase. This article will help you understand the best ways to do just that.
Check Your Agreements for Hidden Fees
This advice may seem like common sense, but it can save you grief down the road. Most companies scrutinize their contracts before they sign them, yet they can still fall prey to fine print or complex loopholes. This usually results in hidden fees that can sap money from your bank account each month.
It pays to have an expert review a document before you sign it. Hidden fees can reduce your profit margins and throw off your budgets. Car dealers need to run a tight ship to stay in business, so avoiding unnecessary costs should be a top priority.
Processing Fees Can Eliminate Profits
Hidden fees are annoying enough, but they pale in comparison to processing fees. Essentially, payment processors charge companies a monthly rate based on their sales volumes. This rate hovers around 1.5 to two percent on average, which is acceptable for most industries. However, car dealerships only make about one to two percent profit on each car they sell. If a customer wants to pay for their entire order on credit, the dealer loses a substantial amount of its revenue to processing fees.
As a result, most car dealerships only allow customers to pay for part of an order on credit. This limits fees and ensures the business remains profitable. Still, you need to consider fees when you negotiate for a card processing plan.
Chargeback Protection is Essential
No one wants to incur chargebacks. They draw ire from payment processors and result in substantial financial penalties. Some companies even find themselves blacklisted if they have a particularly heinous record. But car dealerships stand to lose more than most when they receive chargebacks.
Again, this is due to the expensive nature of their merchandise. A chargeback on a car will naturally withdraw more money from a merchant account than smaller-ticket items. If a dealership’s merchant account is low on funds when a chargeback occurs, the business could violate the terms of its processing agreement.
Therefore, protecting yourself against chargebacks is essential if you run a car dealership. There are concrete steps you can take to limit your penalties, but you should also look for plans that offer some form of protection against these threats.
There’s a Better Way
Dealers have to tread carefully when they seek payment processing services, but thankfully, there’s a better way. An all-inclusive processing plan offers you a fair rate with no hidden fees. You’ll receive a streamlined statement each month, as well as chargeback protection and fast deposits. With plans like these, you’ll never have to worry about needless processing expenses again.
