Profitability isn’t just about selling cars anymore. For dealerships today, real performance is measured in operational precision – and every overlooked cost adds up faster than ever. While fixed operations have traditionally been a dependable source of gross profit, even these departments are feeling the strain of rising operating expenses and tightening consumer behaviour. Beneath all of this, one of the most damaging hidden costs often escapes notice: the unchecked drain of credit card processing fees.
A compliant, customer-focused pass-the-fee program offers a thoughtful way to recover these costs, if it fits your dealership’s goals and approach to customer experience.
The Hidden Drain on Dealership Profitability
Every time a customer taps a credit card, your dealership pays between 1% and 3% in processing costs. It may not seem significant per transaction, but across an entire operation, the numbers add up fast. The average dealership in Canada processes about $260,000 per month in credit card sales – meaning roughly $70,000 annually is lost to card fees alone.
In a multi-rooftop operation, the impact is even greater. Five rooftops could easily see $350,000 or more simply vanish into credit card networks. This kind of unchecked leakage isn’t just a budget annoyance – it’s a material margin erosion that affects bottom-line profitability, year-end bonuses, and enterprise value.
When margins are thin and operating costs are climbing, dealerships can no longer afford to ignore this invisible drain.
Credit Card Convenience: Who Really Pays?
Canadian customers use credit cards about 81% of the time for service and parts transactions. For consumers, it’s fast, easy, and often tied to rewards programs. But for dealers, it means funding those rewards out of their own profits.
By absorbing credit card fees, dealerships unintentionally subsidize customer loyalty to the card companies-not the dealership itself. These costs lower profitability per sale, shrink service department margins, and put pressure on front-end pricing decisions. In service, where margins are already squeezed, that 1%–3% hit can quietly eat away at operational targets month after month.
And yet, many dealers hesitate to address the issue, fearing customer backlash or CSI damage. But the data tells a different story.
What Customers Really Think About Payment Choice
One of the biggest misconceptions around pass-the-fee programs is the idea that customers will be angered by the change. In reality, studies-and real-world dealership rollouts-show that when framed properly, customers overwhelmingly accept, and even respect, transparent payment models.
It all comes down to positioning. Customers don’t object to paying differently; they object to surprises or feeling gouged. A simple, confident explanation such as:
“We offer multiple payment options. Debit and cash are at no additional cost. If you choose credit, there’s a small surcharge directly from the processor.”
…completely reframes the conversation. It’s no longer about penalizing the customer. It’s about giving them a choice-and inviting them to make the best decision for themselves.
Dealerships that implement clear signage at payment points, train their advisors to communicate the program naturally, and ensure that the surcharge is applied consistently and compliantly, report minimal customer pushback. In fact, data shows that debit card usage typically doubles post-implementation, further reducing overall processing costs.
When transparency is prioritized, customers not only accept the change-they often appreciate it.
Why Absorbing Card Fees Hurts More Than You Think
By continuing to absorb card fees, dealerships are doing more than sacrificing a small margin. They’re sacrificing operational leverage.
Consider the numbers: for every $1 million processed on credit cards, a dealership loses approximately $22,000 to $30,000 annually. These aren’t hypothetical dollars-they’re real, recoverable profits that could be reinvested into technician hiring, facility upgrades, digital retailing improvements, or simply strengthening the bottom line.
Moreover, every dollar of recovered margin directly boosts EBITDA-a critical metric for dealership valuation, particularly in today’s competitive M&A environment. In short, addressing card fees isn’t just about today’s P&L. It’s about protecting the store’s future value.
The Dealer’s Playbook: How to Implement Pass-the-Fee Correctly
Successful dealerships don’t guess their way through major operational changes – and implementing a pass-the-fee program is no exception. The rollout must be strategic, compliant, and customer-first. Here’s how top-performing stores do it:
- Start with fixed ops.
Launch the program in service, parts, and recon departments where transaction volumes are high, emotional attachment is lower, and customers are already comfortable using debit. - Train advisors and service writers early.
Equip frontline staff with simple, positive language that emphasizes customer choice rather than additional cost. - Ensure compliance at every touchpoint.
Signage, POS prompts, terminal scripting, and receipts must clearly disclose the surcharge while avoiding application to debit, prepaid, or cash transactions. - Use transparent receipts.
Itemized receipts showing the service amount, credit surcharge, and total help build trust and eliminate confusion at checkout. - Monitor and optimize.
Track payment trends, CSI scores, and customer feedback post-rollout, allowing for adjustments if necessary to ensure continued success.
Dealerships that follow this structured approach consistently report smooth transitions, high customer acceptance, and strong margin improvements with negligible friction.
Real Results from Dealerships Like Yours
Theoretical savings sound good. But the real proof comes from actual dealership performance after implementing a pass-the-fee model.
A multi-city auto group operating five rooftops reported $366,886 in annual savings within their first year of rollout, combined with a doubling of debit usage from 16% to 32%. Credit card acceptance costs were slashed by over 99%, with no measurable impact on CSI.
Another dealer group, spanning over 15 rooftops, realized nearly $900,720 in annual savings, while their customers’ use of debit nearly tripled.
In both cases, dealerships were able to reinvest the savings into staffing, technology upgrades, and expanded marketing efforts – transforming what was once a silent cost into a strategic growth opportunity.
Financial Wins That Go Beyond Immediate Savings
The benefits of a pass-the-fee program don’t stop at monthly expense reduction. They cascade throughout the dealership’s financial ecosystem:
- Increased EBITDA boosts store valuation for future sale opportunities.
- Tax efficiency improves cash flow; under CRA guidelines, surcharges are considered a financial service and are not subject to GST/HST.
- Improved net revenue per transaction without touching advertised pricing, protecting competitiveness in a price-sensitive market.
- Stronger operational resilience against interest rate hikes and supplier cost increases.
When you stop funding customer reward points and start capturing your own margins, the dealership gains the flexibility to invest in areas that drive sustainable, long-term growth.
The Bottom Line: Don’t Let Silent Costs Control Your Future
Today’s automotive landscape rewards dealerships that think differently, not just about what they sell, but how they operate.
Pass-the-fee programs represent more than just a cost-saving tactic. They signal a shift toward operational intelligence, financial resilience, and customer-centric transparency. Dealerships that implement these programs thoughtfully don’t lose customers, they gain control over their margins and future.
In a business where every tenth of a point matters, stopping the silent losses caused by credit card fees isn’t optional anymore. It’s the smartest move a dealership can make.
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