A new survey by PayJunction found that when faced with a credit card surcharge, car buyers are more likely to change their payment method than their dealership.
The details: The findings, reported by the payment technology company, reveal that most of the 500 current drivers surveyed strongly or somewhat agreed that a credit card surcharge would not impact their choice of dealership.
71% of respondents agreed a credit card surcharge would not affect which dealership they choose (30% strongly, 41% somewhat).
51% of those surveyed indicated they would consider switching to cash, debit, or check for routine maintenance if a surcharge were applied, with 49% saying they would do so for repairs.
Why it matters: The findings suggest dealers may be able to implement credit card surcharges without significantly impacting customer loyalty. Even so, offering multiple payment options could be critical to preserving the customer experience as buyers look for ways to avoid added fees.
Between the lines: Credit cards remain a popular payment method because of the financial flexibility they provide, with installment financing also having major appeal as a way to manage unexpected repair costs.
Among the top reasons cited for choosing a credit card were the ability to earn rewards or cashback (60%) and having more time to pay off purchases (53%).
Routine maintenance and repairs were the dealership services that respondents most frequently selected as purchases they would put on a credit card, at 73% and 67%, respectively, even with a surcharge of up to 3%.
Nearly half (49%) of respondents would consider Buy Now, Pay Later for a large, unexpected repair, with interest highest among millennials (60%) and Gen Z (54%).
And being able to spread out payments and preserve cash were the most frequently cited motivations among those surveyed, at 63% and 57%, respectively.
What they’re saying: “Our findings suggest that there is value in a holistic approach built around giving customers a choice rather than relying on a single payment method,” Randy Modos, president and co-founder of PayJunction, told CDG News via email. “Rather than thinking about sales and service as requiring completely separate payment strategies, dealers can focus on creating a consistent experience that offers payment flexibility across the dealership.”
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Digging deeper: Understanding “compliant surcharging” is key, given the complexity involved in ensuring payment processes meet applicable requirements, Modos explained.
Modos said different state laws and requirements can impact how surcharging is implemented, which can be especially tricky for dealership groups with locations across multiple states.
Amid pressure to improve sales numbers, there can also be major financial consequences if a dealership is found to be noncompliant, he added.
Bottom line: Credit card surcharges may be less likely to drive customers away from a dealership than to change how they pay, but offering multiple payment methods is increasingly important for dealers looking to manage transaction costs, preserve the customer experience, and capture service revenue.
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