The Margin Problem Dealers Rarely Audit: Credit Cards (And 3 Practical Fixes) | Eric Cohen, CEO at Merchant Advocate
About this episode
Credit card processing fees are a hidden profit leak for car dealerships, often leading to significant overpayments. Eric Cohen, CEO of Merchant Advocate, explains how many dealers are unaware of the negotiable nature of these fees and the common hidden charges that inflate costs. He shares insights on optimizing payment processing setups and discusses practical steps dealers can take to reduce expenses without sacrificing service. The episode is packed with valuable information for dealership operators looking to improve their bottom line.
dealer markup
"...So you have the markup, you have the credit card processor markup, right?"
Dealer markup is when a car dealership charges more than the price suggested by the manufacturer. This can happen if a car is in high demand or if the dealership wants to make more profit.
Dealer markup refers to the additional amount that a dealership adds to the manufacturer's suggested retail price (MSRP) of a vehicle. This markup can vary based on demand, inventory levels, and the dealership's pricing strategy.
credit card processor markup
"...you have the credit card processor markup, right?"
Credit card processor markup is the extra fee that businesses, like car dealerships, pay when customers use credit cards to buy something. This can add to the total cost of buying a car.
Credit card processor markup refers to the fees that a dealership incurs when processing credit card payments. These fees can vary based on the payment processor and can impact the overall cost of a vehicle purchase.
hidden fees
"...the negotiable part is on the markup and the hidden fees..."
Hidden fees are extra costs that you might not see when buying a car. They can make the car more expensive than you initially thought.
Hidden fees are additional charges that may not be clearly disclosed during the car buying process. These can include processing fees, dealer fees, and other costs that can significantly increase the final price of the vehicle.
Visa MasterCard fees
"...and the fees that look like Visa MasterCard fees because they're spelled and listed similar to a Visa MasterCard fee..."
Visa and MasterCard fees are charges that businesses pay when customers use credit cards to buy something. Sometimes, dealers might add these fees in a way that makes them look like regular costs.
Visa and MasterCard fees refer to the transaction fees charged by credit card companies for processing payments. Dealers may list these fees in a way that makes them seem like standard charges, but they can also be a source of profit for the dealership.
non-negotiable
"...a rep might say is non-negotiable actually really are."
Non-negotiable means something that can't be changed or discussed. In car buying, some fees are said to be non-negotiable, but you might still be able to negotiate them if you know what to ask.
In car sales, non-negotiable items are charges or fees that the dealer claims cannot be changed or discussed. However, many of these items can actually be negotiated if the buyer is informed.
Honda
"...if they're, you know, a Honda dealer versus a Mercedes dealer, right?"
Honda is a car company that makes many different types of vehicles, like cars and motorcycles.
Honda is a well-known automotive manufacturer that produces a variety of vehicles, including sedans, SUVs, and motorcycles.
Mercedes
"...if they're, you know, a Honda dealer versus a Mercedes dealer, right?"
Mercedes is a luxury car brand that makes high-end vehicles known for their quality and technology.
Mercedes, officially known as Mercedes-Benz, is a luxury automotive brand known for its high-quality vehicles and advanced technology.
parts and services
"...But, you know, parts and services where a lot of the transaction happens..."
Parts and services are the repairs and maintenance that car dealerships provide to keep vehicles running well.
Parts and services refer to the maintenance and repair services offered by dealerships, which can be a significant source of revenue for them.
MSRP
"...what's tissue or what's cost or what's, like, there's a million different things and add-backs and buy-backs and incentives, right?"
MSRP is the price that the car maker suggests dealers sell a car for. It's like a guideline for how much you should expect to pay.
MSRP stands for Manufacturer's Suggested Retail Price. It's the price that the manufacturer recommends that the dealer sell the vehicle for, which can serve as a starting point for negotiations.
dealer fees
"...there's a million different things and add-backs and buy-backs and incentives, right? All these things."
Dealer fees are extra costs that car dealerships might add on top of the car's price. These can include things like paperwork fees or preparation costs.
Dealer fees are additional charges that a dealership may add to the price of a vehicle, which can include documentation fees, preparation fees, and other costs associated with the sale.
incentives
"...add-backs and buy-backs and incentives, right? All these things."
Incentives are discounts or special deals that car makers or dealers offer to help sell cars. They can make buying a car cheaper or more attractive.
Incentives are special offers or discounts provided by manufacturers or dealers to encourage customers to buy a vehicle. These can include cash rebates, low-interest financing, or special lease offers.
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