A homeowner signs an $18,000 reroof on a promotional financing plan. The lender funds you $16,380. The $1,620 difference is a dealer fee, and in many shops it never gets assigned to a job. It shows up as a bank deposit that is "short," gets plugged to miscellaneous, and the job still looks like it made 30%.
What a Dealer Fee Is
Consumer financing programs often advertise low or zero interest to the homeowner. Someone pays for that rate, and it is you. The lender deducts a percentage of the loan, the dealer fee, before it pays you. The rate depends on the lender, the loan term, and the promotional rate offered, so read your own agreement and do not assume a number.
The figures below are illustrative, using a 9% fee.
Worked Example: A $18,000 Financed Job
Direct job cost (materials, labor with burden, disposal, permit) is $12,600. That is a 30% gross margin at an $18,000 price.
| Cash / check job | Financed job (9% fee) | |
|---|---|---|
| Contract price | $18,000 | $18,000 |
| Dealer fee | — | $1,620 |
| Cash received | $18,000 | $16,380 |
| Direct job cost | $12,600 | $12,600 |
| Gross profit / margin | $5,400 / 30.0% | $3,780 / 21.0% |
Nine points of margin disappeared. If 40 jobs a year are financed, that is $64,800 of fees. On a company running a 10% net margin, $64,800 is the net profit on $648,000 of revenue.
Pricing the Fee In
Do not subtract the fee from your markup and hope. Solve for the price that keeps your target margin after the fee:
- Price = cost ÷ (1 − target margin − fee rate)
- $12,600 ÷ (1 − 0.30 − 0.09) = $12,600 ÷ 0.61 = $20,656
Check it: a 9% fee on $20,656 is $1,859. Cash received is $18,797. Less $12,600 of cost leaves $6,197, which is 30.0% of the price.
That is a 14.8% higher sticker price than the $18,000 job, which is why many contractors quote a single price and absorb the fee, or quote a separate cash price. Either is a decision. Leaving the fee unpriced is not. See markup vs margin for why adding a flat percentage never gets you there.
Recording It by Job
- Book the full contract amount as revenue. Invoice the customer $18,000, not $16,380. Revenue is what the customer owes, not what lands in the bank.
- Post the fee to the same job. Create a "Customer Financing Fees" account under cost of goods sold, and tag it to the job so it hits job-level margin. Confirm the account placement with your CPA.
- Reconcile the lender deposit. The deposit equals the invoice less the fee. Match it to the invoice and the fee line, not to a plug.
- Watch for milestone funding. Some lenders fund in stages. Track the unfunded balance as a receivable so it does not look like an unpaid customer.
With fees on the job, your job costing report shows the real 21% and your pricing conversation changes.