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Pricing and DealersDiscussions that are specific to vehicle pricing, preferred dealer pricing, current incentives, rebates, and experiences.
This is a discussion thread titled "How do dealers like to be paid?", within the Pricing and Dealers forum, part of the Marketplace Forums category.
This was a question I asked my local Toyota dealer recently, as I expect to be buying my truck very soon. I won't be doing any dealer financing, so it will be basically a cash deal.
For convenience sake, I thought about just putting it on my credit card and getting my other banking/finances worked out later at my leisure and just paying it when my bill comes in. In past vehicle purchases, I did all this beforehand and wrote a check. It sure would be easier to just flip out the plastic. In my thinking, it should be better for a dealer too because he doesn't have to wonder about my check and the purchase is verified and finalized electronically. With a credit card, he is covered.
But the sales guy told me they hated to take credit cards because they are charged 5% on every purchase whenever they allow a customer to put a vehicle on a credit card. I was shocked. If you figure 5% of a $35,000 or more vehicle, that's some serious money. I became suspicious because he didn't say they didn't take them, only that they were charged that surcharge by the credit card company. What dealer in his right mind would take a credit card if he got a 5% bite taken out of him? Why not just say no to credit cards?
Was I being fed a line, or can anyone say if this is true or not?
I think the percentage varies based on the size of the retailer or the size of the sale. I think it can be as low as 2%. I doubt they would take a credit card for a $45K purchase unless it was MSRP or something. That's a lot of frequent flier miles I could generate. Many cards even have a 1% rebate for the customer.
I have found that the percentage is more like 2% or 3% and most dealers have a limit on how much you can charge. I have been told $5,000 max from two separate dealers.
I have worked in the CC industry for over ten years. The fees depend on the card type and the SIC code or merchant type. Amex, Discover have higher fees but nowhere 5%. On average they run 3.5-4% depending on the volume with that card issuer. Visa and Mastercard depend on their paticular card issuer. I have a spreadsheet with 800 different V/MC card types and each ones ties different fees in. The highest these would go is 3-4% but average 2.2% as long as the card is swiped and not manualy entered. I asked my dealer the same thing and he indicated that there is a 5% charge if purchased on a CC.
By V/MC rules you can not upcharge any product if being purchased on a card. If you remember gas prices had a cash and credit amount and these guys threatened to pull the acceptance if they did not cut this out. So if you wanted to be a stroke you could report them to the card issuer and they would put the heat on them.
Now, there are ways to wiggle around this on the merchant side but I would have to write a book. Hope it helps
I have found that the percentage is more like 2% or 3% and most dealers have a limit on how much you can charge. I have been told $5,000 max from two separate dealers.
I was test driving a Tundra a few weeks ago and told the salesman that I was thinking about putting the truck on a credit card of mine that has a 0% APR for the life of the card. Why pay finance charges? No such luck. The salesperson was quick to tell me that there dealership only allows two or three grand on a card. I'm still gonna wait until incentives and better financing before I buy. Might even wait for the 08's.
Quote:
Originally Posted by TundraMaxxer
This was a question I asked my local Toyota dealer recently, as I expect to be buying my truck very soon. I won't be doing any dealer financing, so it will be basically a cash deal.
For convenience sake, I thought about just putting it on my credit card and getting my other banking/finances worked out later at my leisure and just paying it when my bill comes in. In past vehicle purchases, I did all this beforehand and wrote a check. It sure would be easier to just flip out the plastic. In my thinking, it should be better for a dealer too because he doesn't have to wonder about my check and the purchase is verified and finalized electronically. With a credit card, he is covered.
But the sales guy told me they hated to take credit cards because they are charged 5% on every purchase whenever they allow a customer to put a vehicle on a credit card. I was shocked. If you figure 5% of a $35,000 or more vehicle, that's some serious money. I became suspicious because he didn't say they didn't take them, only that they were charged that surcharge by the credit card company. What dealer in his right mind would take a credit card if he got a 5% bite taken out of him? Why not just say no to credit cards?
Was I being fed a line, or can anyone say if this is true or not?
I have worked in the CC industry for over ten years. The fees depend on the card type and the SIC code or merchant type. Amex, Discover have higher fees but nowhere 5%. On average they run 3.5-4% depending on the volume with that card issuer. Visa and Mastercard depend on their paticular card issuer. I have a spreadsheet with 800 different V/MC card types and each ones ties different fees in. The highest these would go is 3-4% but average 2.2% as long as the card is swiped and not manualy entered. I asked my dealer the same thing and he indicated that there is a 5% charge if purchased on a CC.
By V/MC rules you can not upcharge any product if being purchased on a card. If you remember gas prices had a cash and credit amount and these guys threatened to pull the acceptance if they did not cut this out. So if you wanted to be a stroke you could report them to the card issuer and they would put the heat on them.
Now, there are ways to wiggle around this on the merchant side but I would have to write a book. Hope it helps
Thanks. That's great to know!
The only thing I don't understand is why charge a fee at all, be it 2% or 4%.
It seems to me this should be no different than buying a shirt. Say you buy a shirt at the mall with a price tag on it that says $37 plus tax. You add the tax to the price and that is what is charged to your card. If you are buying a Tundra, you should be able to negotiate your deal and let them add the tax, title and whatever other fees are part of the sale (destination, etc.) and THAT is what shows up on the card. Sure, a truck costs way more than a shirt but I would think CC companies love folks who carry balances.
Credit card companies charge high interest rates. I thought this was how they made their money, but if they are charging fees on large purchases then they really are raking it in.
Thanks. That's great to know!
The only thing I don't understand is why charge a fee at all, be it 2% or 4%.
It seems to me this should be no different than buying a shirt. Say you buy a shirt at the mall with a price tag on it that says $37 plus tax. You add the tax to the price and that is what is charged to your card.
Usually in those situations the shop you are purchasing from covers the %. They get more business by taking CC as payment so it is "Cost of Business" type of thing.
__________________ '05 Tundra DC TRD 2 WHL: The TOW truck, Spectra Mica Blue, with Kenwood H/U, Kenwood Amp and crossover. Infinity 6010cs, 10" Rockford SUB, 6 disc CD Changer mounted in Center console, SWI-X to retain steering wheel controls, 7" TV with DVD. Tinted Windows, Three chamber Flowmaster, Painted front chrome strip
1994 Toy: The TOY Standard cab, Long travel front pulling13" w/Double fox w/Res, Deaver rear at 18" w/Single 2.5 18" fox w/Res., full glass, Bumper to Bumper cage, Gusseted frame, PRP seats, Crow harnesses, Custom steering(All Heims & Chromoly), Grant steering wheel, Smoothest ride around. OH by the way only 70,000 miles.
Usually in those situations the shop you are purchasing from covers the %. They get more business by taking CC as payment so it is "Cost of Business" type of thing.
Exactly. Shop owners, and small ticket items does not concern the retailer by using a CC. That is usualy factored into the price of the product. When you have non tradional items being purchased on a CC they did not factor that one in. The dealer indciated he had a guy purchase one on his for the flight miles. He did not care about the 5% surcharge he weighed the options and the flight (s) outweighed the charge.
CC's charge 2-4% interest on every purchase. When you buy a pair of nike's with a 50% mark-up the store will build that price in knowing 80% of their sales will be with CC.....when you're talking 5-10% margins at a dealership the margins are too tight to allow you to use CC..hence they limit you. I use to have a room mate in school who would take everyone's tuiton and make a downpayment in his CC, then head over to the office and put 10 guys tuition on his card...racked up the air miles like crazy.
I was test driving a Tundra a few weeks ago and told the salesman that I was thinking about putting the truck on a credit card of mine that has a 0% APR for the life of the card. Why pay finance charges? No such luck. The salesperson was quick to tell me that there dealership only allows two or three grand on a card. I'm still gonna wait until incentives and better financing before I buy. Might even wait for the 08's.
What you could do, I think, is finance the truck and then pay off the loan with your card. A friend of mine did that a few years ago with his Xterra. Check with your credit card company first, though (of course).
Thanks. That's great to know!
The only thing I don't understand is why charge a fee at all, be it 2% or 4%.
It seems to me this should be no different than buying a shirt. Say you buy a shirt at the mall with a price tag on it that says $37 plus tax. You add the tax to the price and that is what is charged to your card. If you are buying a Tundra, you should be able to negotiate your deal and let them add the tax, title and whatever other fees are part of the sale (destination, etc.) and THAT is what shows up on the card. Sure, a truck costs way more than a shirt but I would think CC companies love folks who carry balances.
Credit card companies charge high interest rates. I thought this was how they made their money, but if they are charging fees on large purchases then they really are raking it in.
"Raking it in" indeed. CC operations are a great business. Since carrying a balance is optional, the CC co's wanted to get paid to cover their costs and turn a profit even when customers do not carry balances. The transaction fee was invented for this purpose. In addition, back in the 70's when CCs were not yet ubiquitous, a system of "merchant processing" vendors evolved. These are the First Data's of the world that actually sell or rent the merchant a box for swiping, set it up, and actually process the data. They get paid from a portion of the transaction fee, not interest on balances. The more merchants they could sign up, the more money they made and the more the card acceptance grew. It is a very symbiotic relationship for both the CC cos and the processors.
Now, stores were pressured to accept this relationship because it drove business. Imagine two competing gas stations across the street from eachother, one that takes cards and one that doesn't- I bet the convenience of taking cards would make far more people shop in the card friendly store. I would. Then when frequent flyer miles were added to cards- game over.
So, merchants are stuck accepting cards, but as others have posted usually try to limit their "penalty", expecially on such large, low margin deals. (They are now fighting back as the industry has become too greedy with fees too high with PIn based debit cards, but that is another story). Sorry for the lecture, but business history is a specialty of mine.
The credit cards I have offer convenience checks for this reason. But they do charge a service fee to use it. For example, Bank of America charges a certain percent of the purchase (but with a max of $150 I think) and then you just use the check like a regular check so the dealer doesn't pay the credit card fee. Check with your company and see if they do the same. I have used them before with a 0% interest offer and the fee was easily offset by the savings in interest.
We normally only allow 2k on a credit card. Just as mention because of the fees we get charged for doing so. But I have charged a complete highlander hybrid before 43k, as long as I have enough profit margin to pay the fee. I have customers all the time that want to buy a corolla for example at 800 below invoice and want to charge it on their credit card. Needless to say, that aint gonna happen. Our agreement with the credit card companies is 2.5%.
so the good news is that the salesman wasnt lying to you. I dont hear that mentioned much on here so I thought I would point it out again, lmao
__________________
Cory Ellerbee
Truck Manager/Internet Sales Manager
San Francisco Toyota
(415) 395-6364 or corye@sftoyota.com
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How do dealers like to be paid?
'05 Tundra DC TRD 2 WHL: The TOW truck, Spectra Mica Blue, with Kenwood H/U, Kenwood Amp and crossover. Infinity 6010cs, 10" Rockford SUB, 6 disc CD Changer mounted in Center console, SWI-X to retain steering wheel controls, 7" TV with DVD. Tinted Windows, Three chamber Flowmaster, Painted front chrome strip 
1994 Toy: 
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