Automotive industries (auto repair, dealerships, paint and body shops, tire stores, towing services, and aftermarket services) face a unique set of challenges when deciding to process payments. Compared to retail or restaurant, the average transaction is usually a lot higher with costs ranging from $50 to over $10,000 dollars. Auto insurers will often cover much of the repair bill but deductibles still usually range from $50 – $5000 and often customers will pay for those with credit cards. The processing fees on these can quickly add up – sometimes costing over $50 for a single transaction. Below we’ll provide you with a few simple things you can do to minimize your processing bill.
Processing fees usually consist of a percentage and a flat per transaction fee. Because average transactions tend to be large, even a 0.5% percent difference has a much greater effect on the business’s bottom line than $0.10 transaction fee.
Savvy auto shop owners do what they can to discourage card usage or recoup costs – since industry processing percents ranging from 2% – 5% – but often there is no way to avoid card payments as cash and checks continue to become less prevalent forms of payment in the US.
As an important side note, there are also auto business owners who may have been led to believe that they pay as low as 1% – 1.5% in fees. But because of the way the payment industry is structured they are either paying that amount as
- the processor mark up – which is not the same as total fees
- part of a tiered pricing structure in which only qualified cards are 1 – 1.5% while unqualified cards will cost between 2% and 5%
A fair pricing plan for an average business would have the markup as low as 0.1% – 0.5%. Here at Horizon Payments we do not recommend tiered pricing plans because they often have hidden costs and lack transparency.
For the high ticket transactions that are common in auto industries it is important for the business to minimize the percentage fee on processing transactions. Here’s what you can do:
- Have your accountant check how much you pay in total monthly processing fees based on your monthly bank statement. Monthly processing statements may not list all charges for the month. Divide this number by the total dollar amount of cards you accepted for the month. This will get you your percentage effective rate. If you are paying above 2.5% you can probably save on fees.
- Ensure on your processing statement you are not on a tiered pricing plan. The easiest ways to check for this is to look for keywords in the monthly statement such as “Qualified, Mid-Qualified, Non-Qualified, QL, Qual” etc.
- Provide all your prices marked up for card usage and give a discount of 1% – 4% for customers who pay with cash. This can be automated with certain credit card terminals.
- Accept online or in person Automated Clearing House (ACH) e-checks, which have only a flat fee and can provide even more savings.
- Contact us for a no obligation payment optimization strategy session.
By implementing the points above and more we have auto businesses in our network that have saved hundreds and sometimes thousands of dollars a month on processing fees with only a few pieces of information and a 15 minute phone call. Whether you run a small family operation or have a large team or fleet, accept payments in a shop or on the road, one location or 0, Horizon Payments can help your business today.
