Guide
A dealer fee is a cost you pay upfront, not a favour to the customer. Here's the break-even maths, the real fee ladder, and two rules for when to actually offer it.
A finance company offers your customer 0% for 12 months. You get paid in full, upfront, minus a fee. That fee - typically 3.9% to 9.9% depending on the terms - comes straight off your gross margin. The question isn't whether financing helps customers say yes. It probably does. The question is whether the extra jobs it wins are worth what the fee costs you on every job, including the ones you'd have closed anyway.
This is the bit contractors miss. If 60% of your customers would have paid cash or used their own card, and you now push them onto a financed plan because it's easier to offer to everyone, you're paying the dealer fee on those 60% for nothing. The fee only earns its keep on the jobs that financing actually won you - the ones that would have walked without it.
So the real comparison is: how many extra jobs do you need to close, at this fee, to make up for the margin you're giving away on jobs you'd have won regardless?
Here's the calculation, stripped down:
Required close-rate lift = dealer fee ÷ gross margin
This tells you how many extra percentage points your close rate needs to gain, just to offset the fee on your existing volume. It assumes the fee is charged on revenue and margin is measured the normal way (gross profit ÷ revenue). If you're unsure of your own margin number, run your job costs through the markup and margin calculator first - don't guess.
Take a contractor closing 35% of quotes at a 40% gross margin, on jobs averaging $6,000.
Some lenders quote the break-even as a simple percentage-point add-on rather than a relative lift, which is where the commonly cited "6.8-point lift" figure comes from (35% up to roughly 41.8%, depending on rounding and how the fee interacts with margin dilution across your full financed volume). Either way, the message is the same: a 35% closer needs to get close to 42% just to stand still. Everything above that is where financing genuinely pays for itself. Everything below it, you've bought a fee for nothing.
Run your own numbers on a real job through the job profitability calculator before you commit to offering a promo rate - it takes two minutes and tells you your actual margin, not your assumed one.
Dealer fees scale with how generous the promo is to the customer. Longer 0% periods and bigger deferrals cost you more, because the finance company is carrying more risk and more lost interest.
| Promo offered to customer | Typical dealer fee | Margin needed for a 5-point lift to break even |
|---|---|---|
| Standard installment (interest-bearing, no promo) | ~3.9% | 78% |
| 0% for 12 months | ~6.9% | 138% |
| 0% for 24 months | ~9.9% | 198% |
Read that last column carefully. No home service business runs a 138% margin. That's the point: a 5-point close-rate lift almost never covers a 12-month promo on its own. You need either a much bigger lift than 5 points, or a much higher margin job, or both.
These figures move by lender and by your merchant volume, so treat them as a planning range, not a quote. Confirm your actual rate card with your finance provider before you print it on a flyer.
Below roughly $4,000, the dollar value of the dealer fee is small in absolute terms, but the deal size rarely moves someone from "no" to "yes" - most customers in that range can either pay cash, put it on their own card, or walk away for reasons that have nothing to do with monthly payments. You're paying 3.9-6.9% to solve a problem the customer usually doesn't have. Save the promo offer for tickets where a 0% plan genuinely changes the customer's decision: a $9,000 HVAC replacement, an $8,000 re-roof, a $12,000 whole-house rewire. That's where spreading payments turns a "let me think about it" into a signed contract.
Below 30% margin, the fee eats a share of your profit that's too large to recover with any realistic close-rate lift, even on big-ticket jobs. A 6.9% fee on a 25% margin job needs a 27.6% relative lift just to break even - practically impossible to sustain across a book of business. If a job is already running thin, financing makes it thinner. Check the job's real margin against the break-even calculator before quoting a promo rate, and treat "under 30%" as a hard no, not a judgment call you make on the fly.
Financing earns its cost when three things line up together: a ticket size big enough that monthly payments change the buying decision (roughly $4,000+), a margin healthy enough to absorb the fee (30%+, ideally 40%+), and a genuine, provable lift in close rate - not a guess, but something you can see in your own numbers over 20 or 30 quotes. Track close rate with and without the offer for a month before rolling it out as standard practice. If you can't measure a lift, you're just discounting every job by the dealer fee and calling it a benefit.
Divide the dealer fee by your gross margin. That's the close-rate lift you need, as a fraction of your current rate, just to break even. A 6.9% fee needs a big lift on a modest margin - roughly 17% relative, which on a 35% base rate means getting to around 41-42%. Reserve promo financing for tickets above $4,000 and margins above 30%. Below either line, the fee is a cost with no offsetting benefit, and you're better off quoting cash price and letting the customer arrange their own credit.
The Small Business Operations Kit ($19) turns guides like this one into fill-in-once worksheets: rate card, quoting sheet, job costing, payment terms and follow-up templates.