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Automotive Dealers: Everything you Need to Know About Credit Card Surcharge Programs

Transacting with a credit card

Sarah Janssen

Account Lead

Across North America, automotive dealers are increasingly adopting credit card surcharge programs, recognizing them as a strategic solution for lowering their costs. This trend is gaining momentum as dealers search for efficient ways to manage their expenses without compromising on the quality of service or the value offered to their customers.

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TL;DR: Dealers are switching to Rescue’s surcharge programs to counter rising credit card fees without raising prices on vehicles and services. This shift has led to a notable increase in debit card use and alternative payment methods, reducing credit card transaction fees for dealers to zero. Since becoming legal in Canada in 2022, auto dealerships have rapidly adopted these programs due to frustrations over high credit card processing costs. Implementing a surcharge program with Rescue is straightforward. The surcharge, typically 2.4%, applies automatically to credit card transactions, encouraging transparency and offering customers payment flexibility. Data indicates customers are increasingly willing to absorb these fees, enjoying the benefits of their reward cards, while maintaining the option to use fee-free payment methods like debit or cash.

Why Are More Dealers Switching to Surcharge?

One of the primary motivations behind this shift is the need to counter the rising acceptance fees associated with premium credit cards, without resorting to raising prices on vehicles, parts, and services.

The implementation of surcharge programs has had a notable impact on payment method preferences, effectively reducing credit card fees to zero for the dealers and encouraging the adoption of alternative payment methods such as debit or cash.

Rescue Payment’s internal data shows that dealerships typically see a 30-40% increase in debit card adoption, highlighting a significant shift in consumer payment behavior. This not only benefits the dealers by lowering transaction costs but also offers customers the flexibility to choose their preferred payment method.

How Popular is Surcharge with Canadian Auto Dealerships?

As of October 6, 2022, Canadian merchants became legally permitted to add a surcharge to payment card transactions. This followed a 2011 class action lawsuit against Visa, Mastercard, and several banks. Many dealers are increasingly frustrated about the high cost of credit card processing, which can eat about up to 3% of every sale. Auto Dealers have been rapidly adopting surcharge programs as the technology has became available.

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Transitioning From Traditional Payments to a Surcharge Program

Switching to a surcharge program from a conventional credit card processing system is a straightforward process for most automotive dealerships, though the specific steps can vary based on the dealership’s existing setup and integration capabilities.

The first step involves selecting a reliable provider, such as Rescue, that specializes in setting up surcharge payments in a legally compliant manner. This is important for ensuring that the surcharge program adheres to all regulatory requirements.

When a customer chooses to pay with a credit card, a 2.4% surcharge is automatically applied to all transactions processed through the surcharge-enabled platform. This automatic application simplifies the transaction process for both the dealership and the customer, ensuring that the surcharge is consistently applied across all credit card transactions.

How are Dealers Using Surcharge Programs?

Dealerships are applying surcharges on a variety of transactions, from vehicle deposits to Parts and Service charges. 95% of our dealers elect to have surcharges be applied to all transactions through the dealership to keep everyone on the same page, however it is possible to run a traditional payments platform alongside a surcharge program.

Integrating with DMS and Other Internal Systems

In certain cases, it may require developing and integrating the surcharge system with the dealership’s Dealer Management System (DMS) or other internal financial systems, which is dependent on the set up of your current payments systems. Rescue offers a wide range of ready-made integrations and can custom configure middleware to interact with data if required.

What Do Customers Think?

Our data shows that cardholders are increasingly electing to absorb the surcharge fees as they enjoy the perks and benefits provided by the reward cards they pay with. Customers also maintain a choice – if they choose another payment like debit or cash the fee is not applied.

Inform customers about the introduction of a surcharge is an important step in a complaint process. It involves clear communication through the strategic placement of signage both at the point of sale and at the dealership’s entrance. This transparency ensures that customers are well aware of the surcharge before making their payment decisions, while maintaining trust and avoiding any surprises at the time of transaction.

Learn more about Surcharges

Interested in learning more? Read more of our guides on all things processing and payments

  1. Learn About the Cheap Credit Card Processing Landscape and How Fees Really Work
  2. Credit Card Surcharge: Understanding CRA Rules, Sales Tax (GST/HST), and Exemptions for Canadian Businesses

Want advice on setting up a surcharge program?

We host weekly live trainings teaching you how to get the most out of your surcharge program, and if you want to get learning right now, you can download our Surcharge Canada Guide.

Download the Surcharge Canada Guide
Surcharge Canada Guide