Whether you are looking to start a new career or you are negotiating the price of a used or new car, it helps to know what car salesmen are making. How much do car salesmen really make, whether it be through a salary or commission?
In this guide, we evaluate the different pay structures for car salesmen. We also examine some of the benefits that these salespeople can receive.
How Much Do Car Salesmen Make?
Entry-level car salesmen earn around $28,000 annually, while senior-level car salesmen can earn over $45,000 annually. However, most car salesmen work on commission, earning a portion of the profit that’s made from the sale. On average, this is 25% of the dealership’s profit, plus a small amount on any extras that are sold.
It’s not straightforward to calculate a commission-based salary for salespeople, but we can offer some averages. There are so many factors that play into the total payment, so several areas must be looked at.
The salesman makes a commission that is based on the profit made by the dealership. The employer figures the commission based on the gross profit, which is figured by taking the sales price of the car minus its costs.
However, the pack fee also comes into play. The pack fee is what is set aside for the dealership, ensuring they get paid no matter how low the salesman goes with the car. For example, if a salesman sells a car that provides a profit of $1,750 and the set pack fee is $750, with a 25% commission, here’s what the equation looks like:
$1750-$750 = $1,000 x 25% = $250
In this deal, the salesman earned $250. However, commission rates vary based on how many cars are sold. For the most part, dealerships offer a structure that looks similar to this.
- 1-7 cars sold monthly: 25% commission
- 8-15 cars sold monthly: 30% commission
- 15-20 cars sold monthly: 35% commission
- 21+ cars sold monthly: 40% commission
The more cars that are sold, the higher the commission goes, allowing the worker to make even more on each sale. This is also a structure offered for people making a fixed salary plus commission.
Ways Car Salesmen Get Paid
1. Fixed Salary
In some cases, salesmen are given a fixed salary. Sometimes, this is only provided while the salesmen are training, while other dealerships prefer to pay this way. The fixed salary could be paid hourly or weekly. On average, this salesman will make around $3,000 per month.
When working on a fixed salary, there’s no incentive to sell more cars. The employee gets paid whether they sell vehicles or not. However, if the worker doesn’t perform for the dealership, they won’t have any trouble letting them go.
The majority of car dealerships pay on a commission basis. The worker earns a percentage of the profit from the sale. The average commission will be somewhere between 25 and 40 percent, depending on how many cars are sold.
If the car salesman is turning around ten cars a month with a $1,500 profit on each, they could take home $3,750. Of course, there’s no limit to how much can be made, especially if the salesperson is energetic and a hard worker. On the other hand, if nothing is sold, nothing is made.
To incentivize some salespeople, dealerships may offer some type of draw against future commissions when no sales are made. However, this amount gets subtracted from future commissions.
3. Fixed Salary + Commission
At some dealerships, you can find a mixture of the two pay structures. The dealership might pay a minimum wage, ensuring that the salesmen make something. On top of that, the commission is paid on top of this salary.
In this pay structure, you might make about $1,000 a month, even when no cars are sold. Once you add the commission on top of this, you could end up making $4,000 or more a month, on average.
Other Car Salesmen Perks
On top of the commission and salary, dealerships often give out some form of achievement bonus. As an example, the dealership might offer another $500 if a certain amount of vehicles are sold in the month. This bonus is offered no matter how much commission is made on each vehicle.
This bonus could remain the same each month or could vary based on the season. Some dealerships will also provide a bonus to their top seller as an incentive to be the best.
Have you ever been to a car dealership and felt that the salespeople were pushing a car unnecessarily. It could be that this car comes with a spiff or special incentive for its sale. The dealer will pick out certain vehicles to offer spiffs. These cars might have been sitting on the lot for too long or there might be an overstock.
This spiff encourages the sales team to push it hard. On average, a spiff will pay out between $50 and $500, depending on what type of model it is. Plus, dealerships will offer spiffs for a certain day of the week or to sell a car that has a manufacturer incentive on it. The current spiffs depend on what the manager wants to focus on.
With just spiffs alone, a salesperson can add a lot of money to their salary. It just takes a little motivation and creativity to gain as much as possible.
3. Demo Vehicle
Salespeople will often get to drive a demonstrator car. They may have to pay a small amount to drive it or it could be given to them at no charge. However, it’s going to be included as taxable income in their check.
The car will be outfitted with a dealer plate that insures it. In return, the worker might just need to pay for the fuel and they should keep it clean. If you factor in how much is saved with this model, it could easily add $3,500 to $6,500 to the yearly taxable benefits.
4. Medical/Dental Insurance
The majority of dealerships don’t offer free medical or dental insurance. However, there could be options that are lower cost than what could be found on your own.
The top salespeople have access to the best benefits. In this case, the package might include low-cost health insurance, as well as a 401k or other employee perks.
Qualities of a Successful Car Salesman
If you are thinking of starting a career in car sales, there are some qualities that will help you succeed more than others. You don’t necessarily need a particular education, but some characteristics will help you sell more and make more. Here are a few attributes to consider.
- Ability to engage customers: You must be personable when meeting or greeting the clients.
- Understanding of vehicles: You will need to know the features, engines and specs of various automobiles sold by the dealership. This knowledge allows you to give personal recommendations based on client needs.
- Good communication: You want to follow up with customers and maintain a relationship.
- Organizational skills: It’s important to keep your customer information somewhere that’s organized, allowing for easier follow-up.
- Negotiation skills: Your customers are going to negotiate with you, so you better be prepared to have a tactful response.
- Positive attitude: To sell cars, you must have a great outlook on life. No one wants to buy from a salesman that is down in the dumps.
- Good interpersonal relationships: It’s important that you get along with your co-workers because you will be spending every day with them.
The better you can hone these skills, the more successful you will be at selling cars. This career requires a lot of dedication and hard work, but the sky’s the limit on what can be made if you put your all into it.