How Pass-the-Fee Models Help Dealers Stay Profitable During Economic Uncertainty
Why This Matters:
- Recover up to 3% of revenue lost to credit card fees
- Reinforce staffing, marketing, and digital systems without increasing overhead
- Launch in Fixed Ops with minimal disruption
As the auto industry faces tightening margins, slower inventory turnover, and cautious consumers, many dealerships are bracing for a new kind of financial pressure. Interest rate hikes, inflationary costs, and shifting buyer behaviour are creating a storm where even strong operators feel the squeeze. In times like these, survival isn’t about more volume, it’s about smarter infrastructure.
One of the most overlooked drains on dealership profitability is the cost of credit card acceptance. Processing fees often eat up 1-3% of gross revenue, quietly bleeding from already-thin margins. But unlike the economy, interest rates, or OEM targets, this is one expense dealers can control.
Enter merchant fee recovery – better known as surcharge programs. In 2025, these customer-choice pricing models are gaining traction not just as a cost-saving measure, but as a long-term resilience strategy. For dealerships focused on navigating the downturn, keeping staff employed, and maintaining growth opportunities, the ability to reinvest what used to be a sunk cost could make all the difference.
The Hidden Impact of Card Fees
A dealership processing $1 million per month in credit card transactions could be losing $10,000 to $30,000 every month to processing fees. Over a year, that’s $120,000 to $360,000 – gone.
These are real dollars that could be used to:
- Retain or rehire staff during downturns
- Invest in better tools and CRMs
- Launch service specials or customer loyalty programs
- Cover rising utility and facility costs
- Reduce interest-bearing debt
In a flush economy, fees like this might be tolerated. But in a tightening market, they become untenable – especially when compliant, consumer-friendly recovery programs are available.
What is a Pass the Fee Program?
A pass the fee program allows a business to add a small surcharge of 2.4% when a customer chooses to pay via credit card. This fee is clearly disclosed, often through signage and digital notices, and gives customers the choice to pay via debit or cash instead.
Why it works:
- Customers are given a clear choice, no hidden fees
- Dealers retain 100% of the revenue from credit card sales, as the surcharge covers the cost of processing
- Programs are compliant with Visa/Mastercard rules and federal regulations
This isn’t a loophole, it’s a modern pricing strategy built on transparency and regulation.
Surcharge Myths, Debunked
Despite the growing adoption of surcharge programs, many dealers still hesitate – often due to lingering myths. Here’s a quick debunk:
Myth 1: “Customers will be upset.”
Fact: Studies show most consumers value transparency over flat pricing, especially when given alternatives. When framed as a choice – pay by debit or cash with no fee, or credit with a small processing charge – most customers respond positively.
Myth 2: “It’s illegal.”
Fact: Surcharging is legal in all provinces and territories (excluding Quebec) when following proper regulations. Working with a compliant provider ensures every aspect of the program aligns with federal and card brand standards.
Myth 3: “It’ll hurt conversion rates.”
Fact: Over 80% of customers continue to pay by credit card even with a small, clearly disclosed fee. When implemented transparently, these programs have minimal impact on customer behaviour.
Customer Sentiment: The Age of Optionality
Today’s consumers aren’t shocked by an additional fee. However, they expect clarity and choice. From airline baggage fees to Uber service charges and tap-to-tip prompts, the idea of “user pays” is now mainstream. People value knowing exactly what they’re paying for, and why.
According to a 2024 RetailDive survey:
- consumers prefer transparent pricing
- appreciation of having multiple payment options, including ways to avoid fees
- Among Gen Z and Millennials, fairness and value alignment matter more than flat pricing
This is especially relevant in Fixed Ops and Parts departments, where customers are often more transactional and value-driven. By offering a clear, optional surcharge with a debit/cash alternative, dealers protect their margins while honouring customer agency.
Recession-Proofing in Practice: Real Dollars, Real Outcomes
Let’s say your dealership implements a 2.4% surcharge on credit card payments in your Parts & Service department – typically your most stable revenue stream.
- Monthly card volume: $200,000
- Surcharge collected: $4,800/month
- Annual recovery: $57,600/year
That’s not a rounding error. That’s the salary of a service advisor, the cost of a new CRM feature, or the difference between layoffs and continuity.
Case in Point: Hypothetical Use Imagine a mid-size suburban dealership recovering $85,000 in annual processing fees. They used those funds to:
- Keep two senior service techs during the winter slowdown
- Launch a local referral program
- Add a texting feature to their CRM for faster service updates
These changes weren’t just about saving money – they improved retention, increased service lane efficiency, and helped build customer loyalty.
Beyond the Numbers: Why Stability Matters
In a downturn, your ability to maintain stability becomes a competitive edge. Customers notice when teams stay intact, when service levels don’t slip, and when communication tools improve. Merchant fee recovery empowers dealerships to prioritize consistency and long-term thinking.
Long-Term Vision: Turn Cost Recovery Into Future Stability
- Retain Staff, Sustain Culture
Layoffs might balance short-term books, but they damage team morale and customer continuity. Merchant fee recovery provides a sustainable cushion to retain advisors, techs, and BDC reps, without sacrificing service.
- Future-Proof Your Hiring Strategy
By keeping your team intact through the downturn, you avoid the costly hiring and onboarding cycle when the market rebounds. This positions you to scale faster and with less disruption.
- Invest in Digital Infrastructure
Redirecting recovered fees into tools like service schedulers, CRM integrations, or digital payment platforms accelerates modernization without breaking budgets.
- Protect CSI and Reputation
Keeping your pricing fair, your service consistent, and your team stable enhances the customer experience. That’s what drives loyalty, referrals, and sustained reputation – even in down cycles.
Start with Fixed Ops
Your Parts & Service department is the best pilot environment:
- Consistent volume
- Familiar local customers
- Staff better equipped to communicate value-based pricing
Rolling out the program here helps staff get comfortable with talking about fees and observing customer reactions in a controlled, repeat-visit environment.
Choose a Compliant Provider Partner with processors who:
- Follow Visa/Mastercard surcharge regulations
- Provide automated signage and disclosures
- Offer reporting that integrates with your DMS
Rescue Payments specializes in dealership-ready surcharge programs. Our solution includes signage kits, training, and reporting tools designed to ensure compliance and customer satisfaction.
Communicate with Confidence
Use straightforward language like:
“We’re proud to offer customer choice pricing. You can still pay by debit or cash without a fee, or choose credit for a small processing charge.”
Avoid apologetic phrasing. Clarity builds trust. Ensure all signage is visible and every advisor is trained on how to explain the program clearly and positively.
Monitor and Adjust
Track adoption rates, gather team and customer feedback, and adjust messaging as needed. Most dealerships find that over 80% of customers continue to pay by card, especially when the program is explained clearly. Internal adoption also improves when the team understands how recovered funds are being reinvested.
What to Expect in a Demo
When you book a demo with Rescue Payments, you’ll:
- See how surcharges are calculated and presented
- Review signage, disclosures, and reporting examples
- Explore pilot strategies for Fixed Ops or Full Store rollout
- Get real-time answers about compliance, tech integration, and customer reactions
Whether you’re exploring or ready to move, the demo is built to meet your pace.
The Bottom Line: Stability is a Strategy
In uncertain times, dealerships don’t just need to cut, they need to cut smart. Recovering merchant fees doesn’t require layoffs, discounts, or risky decisions. It just requires the willingness to stop giving money away.
While others tighten belts and wait for the tide to turn, your dealership can redirect tens of thousands of dollars back into your business – with fairness, transparency, and zero disruption to your customer experience.
Book a Demo with Rescue Payments
