Dealers need to review customers' payment options carefully to avoid shrinking margins caused by recent changes in payment card charges introduced by the EU, according to audit and tax specialists RSM.

In an industry with high value transactions the replacement of the previous flat rate fee per debit card transaction with fees amounting to 0.2 per cent of the transaction value is hitting dealer profits hard, Alison Ashley, head of automotive at RSM, said.

With debit cards remaining the preferred method of payment for many customers, absorbing the increased cost will heavily impact the already narrow margins.

And Ashley has suggested that Motor retailers need to proactively manage and encourage alternative payment options to ensure they minimise the financial impact, while continuing to provide customers with viable choices.

She 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.”

Ashley suggests that 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.

She said: “Managing and implementing change can be complex, but proactively responding to this change is crucial to remaining competitive.”