Motor dealer margins face pressure following changes to transaction charges

Recent changes in payment card charges introduced by the EU continue to impact motor retailers’ bottom line.

The previous flat rate fee per debit card transaction has been changed to 2 per cent of the transaction value. In an industry with high value transactions this shift can result in a significant expense when buying a vehicle.

Debit cards remain the preferred method of payment for many customers. Absorbing the increased cost will heavily impact the already narrow margins. Motor retailers need to proactively manage and encourage alternative payment options to ensure they minimise the financial impact, whilst continuing to provide customers with viable choices.

Alison Ashley, head of automotive at RSM, said:

‘Motor dealers find themselves in a difficult position; on the one hand margins are tight so there is very little room to be able to absorb the additional costs. On the another hand, customer service and stacking a competitive deal is paramount and passing on an additional cost at the final point of sale is not going to be easy.

‘The best approach for motor retailers is to review all payment options and implement an alternative route that shields the customer from additional fees and protects margins. Managing and implementing change can be complex, but proactively responding to this change is crucial to remaining competitive.’