• /
  • /
Date of writing
March 23, 2023
Time of reading
6 minutes
Modern Payment Methods for Car Dealerships in the US: Exploring Contactless Payments, Digital Wallets, and Other Trends
A report released on Friday revealed that the earnings of U.S. car dealers have recently decreased from the record levels achieved in 2022, due to the impact of high interest rates and inflation on margins. Despite this, the latest Haig Report indicated that profits at auto dealerships have still remained high.
In 2022, profits reached an estimated $6.5 million per location for dealerships owned by public car retailers, which is more than three times the pre-pandemic levels.
High margins on new cars and big gains from fixed operations have been the main reasons for these profits. Although there is an expectation that profits will decline in the future as new vehicle inventories increase and pricing power weakens, most dealers don't expect the decline to be immediate or substantial.

In fact, it is predicted that profits per store in 2024 will still be more than double the pre-pandemic levels. Overall, many dealers remain optimistic about the future.

The U.S. automotive industry continues to evolve, as do the payment methods used by dealerships to process transactions.

Traditionally, dealer organizations have been rather conventional when it comes to adopting technological advancements in payment methods. However, changes in car buying and selling behaviors are pushing for significant and transformative changes in the car sales industry.

As digital natives become more prevalent in the car market, they bring entirely new expectations when it comes to purchasing and selling used cars. Additionally, older generations are also picking up new habits. Due to their exposure to online experiences like Amazon, car buyers and used car sellers are increasingly demanding omnichannel customer experiences. They conduct research and make selections differently from their non-digital predecessors and expect the same level of capabilities and service quality when dealing with car dealers as they receive in other aspects of their digital lives.
Although satisfying customers' needs may seem like a simple task, creating the essential abilities to do so demands considerable effort. This process extends well beyond the realm of websites. In recent years, contactless payments, digital wallets, and other modern payment solutions have emerged as popular alternatives to traditional methods like cash and checks.
According to McKinsey, the trend of Americans using digital payment methods continues, with over 82 percent of them using some form of digital payment. This includes online purchases made through a browser or in-app, in-store checkout using mobile phones or QR codes, as well as person-to-person (P2P) payments.
The rise of online sales, coupled with a significant effort to avoid in-person purchasing during the COVID-19 pandemic, has resulted in a new norm. Customers now expect to not only browse comprehensive car configurations online but also to buy a new car or sell a used one through digital means.

Public dealership groups in the U.S. are experiencing sustained growth in digital sales, with some retailers selling thousands of cars through online sales platforms. Additionally, several dealers report that at least half of their transactions involve some form of online activity.

In this article, we name some of the latest trends in payment processing for car dealerships in the USA, including the benefits of contactless payments, the rise of digital wallets, and more.
Contactless Payments

With the ongoing COVID-19 pandemic, contactless payments have become increasingly popular among consumers who are wary of touching shared surfaces like payment terminals.

Accepting contactless payments can help dealerships improve the customer experience by cutting down on wait times and making it easier for customers to pay.

Additionally, contactless payments can be processed more quickly than traditional methods, which can help dealerships streamline their operations and increase efficiency. Initially, this business model successfully attracted car buyers, particularly during the pandemic when online shopping and contactless transactions gained popularity.
Digital Wallets

Digital wallets like Apple Pay, Google Pay, and Samsung Pay are also becoming more popular among consumers in the USA.

These wallets allow users to store their payment information securely on their smartphones, making it easy to complete transactions without having to enter credit card details manually.

Accepting digital wallets can be a way for dealerships to stay ahead of the competition and appeal to younger, tech-savvy customers.

McKinsey says that in two years, more than two-thirds of Americans will have a digital wallet, and many of them will likely have more than one. The number of people who plan to use three or more digital wallets in the future rose sharply from 18 percent in 2021 to 30 percent in 2022, according to last year's survey.
Online Payment Solutions

Providing online purchasing options has become essential. With the rise of e-commerce and online shopping, dealerships are increasingly looking for ways to process payments online. Online payment solutions like PayPal and others offer dealerships a way to accept payments securely over the internet, which can be especially useful for dealerships that sell vehicles online or through social media channels.

Alan Haig, an automotive retail consultant and president of Haig Partners, stated to ABC News that the transition towards digital retail is beneficial for dealerships that adopt it. However, those that fail to do so will lose customers and suffer the negative effects of this trend.

Unlike other companies that may take 3-5 days to process payments, Carment, based on Whillet's embedded finance solution, is a payment provider for dealerships that offers instant payment processing for purchasing used cars.

The platform enables direct transfers from business accounts to personal accounts or bank cards, replacing outdated payment methods. The system ensures secure transactions, providing protection against fraud and other security threats to both dealerships and customers. Additionally, all funds are safeguarded by Carment's trusted bank partner.
Electronic Funds Transfer and ACH payments

ACH payments are electronic funds transfers that are processed through the Automated Clearing House network. Dealerships can also use these payments to accept payments from customers in addition to using them frequently for recurring transactions like payroll and utility bills. ACH payments are commonly used by car dealerships as a method of receiving payments from customers.

Instead of accepting cash or checks, dealerships can offer customers the option to pay via ACH, which can be a faster, more convenient, more secure, and more cost-effective way for dealerships to process transactions, especially for customers who prefer to pay using bank account details rather than credit cards.

ACH payments can also be used for other types of transactions, such as lease payments, financing payments, and service payments. However, not all customers may be comfortable using ACH payments, and the traditional method can take several days.
Conclusion:
As we've seen, there are many modern payment methods available to dealerships in the USA, each with its own unique benefits and advantages. Whether it's contactless payments, digital wallets, online payment solutions, or ACH payments, dealerships that are willing to embrace new technologies and trends are likely to stay ahead of the curve and provide a better customer experience overall.