Short answer: financing dealer fees and card processing fees are a cost of sale, not a marketing expense — so they belong in your price book like any other cost. Calculate one blended fee rate across your actual payment mix, then gross up your prices by dividing by (1 − fee rate) instead of adding the percentage on top. Adding 9% to cover a 9% dealer fee leaves you short every time.
What financing and card fees actually cost contractors
Most trades shops now take payment four different ways: check or ACH, credit card, standard-rate financing, and promotional 0% financing. Three of those four cost you money off the top.
A dealer fee is the percentage a lender deducts from the loan before it disburses the money to you. Quote $12,000, sell it on a 0% promo with a 9% dealer fee, and $10,920 lands in your account. The customer never sees the fee and never pays it. You do.
The rate depends almost entirely on how attractive the loan is to the homeowner. The cheaper the money is for them, the more it costs you.
| Payment method | Typical cost to you | Who absorbs it |
|---|---|---|
| Check or ACH | 0% – 0.5% | Effectively free |
| Credit card | 2.5% – 3.5% | You, unless you surcharge |
| Standard-rate financing (7%–13% APR) | 0% – 4% | You |
| 0% APR, 12–24 months | 7% – 11% | You |
| 0% APR, 60 months | 4% – 7% | You |
Those bands come from lender fee schedules published by Hearth and One Click Contractor, which puts the full observed range across programs at roughly 3.9% to 15.75% per financed job. On a $15,000 system change-out, the spread between your cheapest and most expensive payment method is over $2,000 — more than the net profit on many jobs.
A 9% dealer fee on a job priced at a 45% gross margin does not cost you 9% of profit. It costs you roughly 20% of your gross profit dollars on that job.
Why "just add 10% to everything" is the wrong fix
The standard advice from financing sales reps is to pad every quote by 5%–10% and stop worrying about it. That advice is wrong in both directions at once.
It overcharges the majority of your customers. If 60% of your revenue arrives by check, a blanket 10% bump makes you the expensive bid on every job where financing was never going to come up. You lose work you should have won.
It still under-recovers on the jobs that matter. This is the part almost nobody gets right. A dealer fee is charged on the final contract price, not on your original number. So the percentage you add gets taxed too.
Work the numbers on a job you need to net $10,000 on, with a 9% dealer fee:
- Add 9%: price becomes $10,900. The lender takes 9% of $10,900 = $981. You net $9,919. You are $81 short.
- Gross up correctly: $10,000 ÷ (1 − 0.09) = $10,989. The lender takes $989. You net exactly $10,000.
The gap looks small at $10,000 and stops looking small at volume. A shop financing $400,000 a year on 0% promos leaves about $3,900 on the table annually from this one arithmetic error — and that is pure bottom-line money, since every other cost was already covered.
If the divide-don't-add pattern feels familiar, it should: it is the same mistake as confusing markup with margin. We covered that math in detail in markup vs. margin for contractors, and you can run either calculation in the free margin and markup calculator.
Step 1: Calculate your blended fee rate
Instead of guessing at a buffer, weight each payment method by the share of revenue that actually comes through it. Pull last year's numbers from your accounting software — you need revenue by payment type, not job count.
Here is a service-and-repair shop where financing is offered but rarely used:
| Payment method | Share of revenue | Fee rate | Weighted cost |
|---|---|---|---|
| Check / ACH | 55% | 0.0% | 0.00% |
| Credit card | 20% | 2.9% | 0.58% |
| Standard-rate financing | 15% | 3.0% | 0.45% |
| 0% APR promo | 10% | 9.0% | 0.90% |
| Blended rate | 100% | — | 1.93% |
Two percent. Not ten. This shop has been told for years to pad quotes by 8% and has been quietly pricing itself out of jobs to cover a cost that barely exists.
Now the same math for a replacement-heavy shop that leads with 0% financing on every system sale:
| Payment method | Share of revenue | Fee rate | Weighted cost |
|---|---|---|---|
| Check / ACH | 25% | 0.0% | 0.00% |
| Credit card | 15% | 2.9% | 0.44% |
| Standard-rate financing | 20% | 3.0% | 0.60% |
| 0% APR promo | 40% | 9.0% | 3.60% |
| Blended rate | 100% | — | 4.64% |
Same trade, same market, blended rates more than twice apart. This is why a rule of thumb borrowed from a competitor or a lender's rep is worth almost nothing. Your number depends on your mix.
Step 2: Put the blended rate in the price book, not in the salesperson's head
Once you have a blended rate, apply it as a cost input across the catalog rather than as a judgment call at the kitchen table. Two ways to do that:
Option A — build it into the sell price
Divide your target sell price by (1 − blended rate). At 4.64%, a $6,000 target becomes $6,000 ÷ 0.9536 = $6,292. Every job carries its share, financed or not, and your techs never have to think about it.
Option B — treat it as an overhead component
Roll the blended rate into your overhead recovery percentage and let your existing markup schedule handle it. If you are already recovering overhead through a markup rate, this is the cleaner path — see how to calculate overhead for contractors for the mechanics.
What you should not do is leave it to the field. A rep who adds a buffer only when the customer mentions financing will guess wrong in both directions, and you will never be able to tell from your P&L whether your pricing is working. The point of a price book is that the number in front of the tech is already correct. Repricing a whole catalog by 4.64% is a two-minute bulk operation in a tool like Pricebookr and a two-day slog in a spreadsheet.
Can you just charge the customer instead?
Sometimes, with real limits, and the rules differ by payment type.
Financing dealer fees: no separate line item. Passing a dealer fee to the borrower as its own charge risks being treated as an undisclosed finance charge under the Truth in Lending Act and state consumer credit codes. The compliance-safe approach is the one above: the same price is quoted to cash and credit customers alike, so the fee is part of your price rather than a charge for extending credit. When in doubt, ask your lender's compliance team — they answer this question daily.
Credit card surcharges: legal in most states, capped, and paperwork-heavy. Visa and Mastercard cut the maximum surcharge from 4% to 3% in April 2023, and you may never surcharge more than your actual cost of acceptance. Colorado and Oklahoma cap surcharges at 2%. Connecticut, Maine, Massachusetts, Puerto Rico and several others prohibit them outright, and card brand rules require written notice to your acquirer roughly 30 days before you start. State-by-state rules change often, so verify before you print it on an invoice.
A cleaner lever than surcharging: quote one price and offer a modest cash or check discount. It is legal everywhere, it is easier to explain, and it steers customers toward your cheapest payment method. Keep it small and deliberate — a discount that outruns the fee you avoided is just a price cut, and discounts cost more margin than most contractors think.
Step 3: Recheck the number twice a year
Your blended rate is only as good as the payment mix behind it. Two things move it: lenders changing their fee schedules, and your own sales mix shifting. Push 0% financing hard for one strong quarter and your blended rate climbs without a single fee changing.
Recalculate every six months, or immediately after any of these:
- A lender revises its dealer fee schedule or promo terms
- You add or drop a financing partner
- Your financing attach rate moves more than about 10 points
- Your processor changes rates or you switch processors
Log the rate you used and the date you set it. When margins drift six months from now, you want to know whether the cause was material costs, labor, or a payment mix that quietly got more expensive.
FAQ
What is a dealer fee on contractor financing?
A dealer fee is a percentage the lender deducts from the loan amount before disbursing funds to the contractor. On a $12,000 job with a 9% dealer fee, the lender pays you $10,920 and collects the full $12,000 from the homeowner over the loan term. The customer never sees it; it comes out of your revenue.
How much are dealer fees on 0% financing?
Typically 7%–11% for 0% APR promotions of 12–24 months, and 4%–7% for longer 0% terms such as 60 months. Standard-rate loans, where the homeowner pays interest, usually cost the contractor 0%–4%. The more the loan subsidizes the customer, the more the lender charges you.
Can I charge the customer the financing fee as a separate line?
Generally no. Adding a fee that applies only to financed customers can be treated as an undisclosed finance charge under the Truth in Lending Act and state consumer credit laws. The standard compliant approach is to price the same for everyone and absorb the blended cost in your price book. Confirm the specifics with your lender's compliance team.
Can I add a credit card surcharge instead?
In most states, yes, subject to a 3% card brand cap — 2% in Colorado and Oklahoma — and never above your actual cost of acceptance. Connecticut, Maine, Massachusetts and Puerto Rico prohibit surcharging, and you must notify your acquiring bank in advance. Rules change, so verify your state before implementing.
Should I raise all my prices to cover financing fees?
Only by your blended rate, which for most service-heavy shops lands between 2% and 5% — not the 8%–10% that lender reps often suggest. Calculate the weighted average across your actual payment mix. A blanket 10% increase makes you uncompetitive on the majority of jobs that never get financed.
How do I make sure the price actually covers the fee?
Divide rather than add. To net $10,000 with a 9% fee, price at $10,000 ÷ (1 − 0.09) = $10,989, not $10,900. Because the fee is charged on the final price, adding the percentage always leaves you a little short.