Welcome to another edition of the Car Dealership Guy Podcast Recap—a rundown of key lessons from top operators, founders, and execs shaping the future of auto retail.
Today’s guest is Eric Cohen, CEO at Merchant Advocate.
We break down why credit card processing is one of the most overlooked expense lines in dealerships, how 60–70% of stores are overpaying, and which “non-negotiable” fees are actually negotiable.
Most dealers are overpaying on credit card processing by 15-25%.
When dealers focus on cutting expenses, they scrutinize headcount and vendor contracts, but credit card processing often flies under the radar despite being a top-five line item.
"60 to 70% [of dealers are overpaying]. We typically see 15 to 25% savings."
For stores processing millions annually, that represents one of the fastest paths to margin improvement without touching operations or headcount.
Processor markup drives most of the overpayment problem.
The wholesale cost from Visa and Mastercard is relatively stable, but the sales rep selling the processing adds their own margin on top, and that margin grows larger when dealers don't understand what they're looking at.
"It's not really Visa, Mastercard overcharging everyone. The pricing is really set by the sales rep selling the processing. The more a sales rep charges, the more they make."
Understanding the difference between wholesale cost and processor markup is the first step toward negotiating better terms.
Hidden fees are designed to look like official network charges.
Transaction risk fees, risk settlement fees, and settlement funding fees all sound like official Visa or Mastercard charges but exist nowhere in the card network's actual fee schedules.
"They look like Visa Mastercard fees. They're padded fees. They're 100% nowhere in Visa Mastercard language."
Learning to identify these made-up line items on statements is critical. Non-PCI compliance fees alone can cost $75 per location monthly for simply not completing a security questionnaire.
Renegotiating with existing processors avoids operational disruption.
Most dealers assume they'd need to rip out terminals and rebuild integrations to save money, but Eric's approach focuses on cleaning up the existing relationship rather than starting over.
"We negotiate and optimize their deal with their current processor without them leaving their current processor."
Staying on the same rails eliminates the risk of breaking CDK or Reynolds integrations while still capturing double-digit percentage savings.
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Surcharging programs can still hide processor profit margins.
In one case, a dealer was passing 3% to customers, but the processor was billing them 3.4% daily, netting the difference while the month-end statement showed only a tiny charge.
"It turns out that they were getting billed daily that 3%. So it looked like a wash, but when you did the math, it was 3.4%. The processor was billing them 3.4%."
Verifying the daily billing rate against what customers are charged reveals whether the surcharge program is actually cost-neutral.
Improper account setup is costing dealers 1-1.5% unnecessarily.
When accounts aren't configured correctly or card data isn't transmitted properly, the processor downgrades those transactions to higher-cost tiers automatically, and most dealers never realize it's happening.
"The savings there could be upwards of 1%. You could be paying 1 to 1.5% percent more when you're not transacting the correct way because you're set up incorrectly."
Getting the technical setup right requires knowledge of interchange qualification rules that most finance teams don't typically have.
Processors are raising rates quietly with minimal notice.
Credit card processing agreements allow processors to change pricing whenever they want, often with nothing more than a small note buried in the monthly statement that no one reads or understands.
"Rates can change. Whenever a processor wants to increase rates, they can do an increase by notifying you on a statement message that no one understands."
Reviewing statements monthly for rate changes prevents a competitive deal from being quietly eroded over time.
Dealers can negotiate most line items they assume are fixed costs.
Many dealers accept their processing statements at face value because sales reps tell them certain fees are non-negotiable, but Eric sees the opposite when he digs into the actual contracts.
"A lot of line items that, you know, a rep might say is non-negotiable actually really are."
The problem is that dealers don't know the language well enough to distinguish between what's truly fixed by the card networks and what's simply processor markup dressed up as a requirement.
Statements use acronyms to hide what fees actually represent.
Processors don't spell out fees in plain English. Instead, they use abbreviations and technical language that make it nearly impossible for finance teams to identify what's legitimate and what's pure margin.
"They're actually acronyms, right, on the statement. So, you need to know what you're looking for."
Without a decoder for the statement language, even experienced CFOs can miss fees that cost thousands per month across multiple locations.
Expense reduction is dominating dealer conversations heading into 2026.
Eric sees expense cutting as the primary focus across dealer groups right now, with operators specifically looking at vendor costs and headcount rather than adjusting compensation plans.
"I mean, I right off the bat, I would think one thing would be, you know, how do they reduce their expenses next year? What's going on with their expenses? Where they're leaking money, right?"
Processing fees represent one of the few areas where dealers can achieve significant savings without touching operations, headcount, or growth initiatives.
