The gist of the matter is that the majority of automobile dealers don’t make a whole lot of money. Dealership salesmen make, on average, roughly $40,000 a year selling 10 cars every month. That comes out to around $330 per car if you do the math.
But that’s not the complete picture. The difference between excellent salespeople (who sell 20 or more cars per month) and subpar salespeople is significant (who might struggle to sell 8 cars in a month). A salesperson who can sell 20 automobiles per month will likely make $6$8k, while someone who can sell only 8 cars per month will probably make minimum wage.
Additionally, the $330 per car average takes both new and used automobile purchases into account. Used autos can occasionally pay $1,000 commissions, although new car sales rarely pay $300 or more.
Here is further information about how commission arrangements work at a typical volume brand dealership:
1. The minimum commission amount that can be earned while selling a car is determined by almost all dealerships. Depending on the dealership, it can cost anything from $75 to $200.
In the auto industry, a sale that generates the smallest commission is referred to as a “mini,” and salesmen despise minis. The majority of newly sold vehicles are minis. You’re unlikely to make more than $75 to $150 when selling a new automobile, unless you’re asking sticker for a hot model.
2. The majority of dealers pay their salespeople a 25 percent commission rate, which is calculated by deducting a “pack” fee from the gross profit. Pack can also be a percentage but is typically a few hundred dollars ($800).
Example: You make a $3000 profit when you sell a secondhand car. After pack, the commission rate is 25%; the pack costs $800.
The average used automobile gross profit, as of May 2013, was roughly $2400, according to the NADA. The majority of dealers also add “administration costs” and “inspection fees” to their own inventory, in addition to pack, so this figure probably includes revenues that salespeople never see. In this approach, they further cut back on management and salesperson commissions.
3. The quota for salespeople is relatively low (8-12 units per month, depending on store and market). It’s challenging to retain salespeople who don’t meet their quotas, in part because they typically perform poorly and in part because they are pessimistic individuals who don’t make a lot of money and, as a result, sap everyone’s enthusiasm.
You get to keep your employment if you meet your quota. You risk losing your job if you don’t.
4. Salespeople frequently experience a boost in their basic commission rate when they surpass their quota by 20% or more.
All of your commissions for the month may be boosted from 25% to 30% if, for instance, your quota is 8 automobiles and you sell 11. Your commission could increase from 30% to 35% if you sell 15 units.
5. Commission rates and pack costs for new and used autos will differ.
6. Commissions are going to differ from department to department. For instance, internet salespeople may only receive a fixed price for each delivery rather than any commission at all. Salespeople for used cars may receive a commission of 35% but cannot promote brand-new vehicles.
7. Compensation arrangements for the car sales industry are made for hard chargers. You won’t make much money if you’re unwilling to put in 5060 hours per week of labor, aren’t assertive enough to ask for the sale, and aren’t polished enough to make them feel at ease.
If you meet every need, you can frequently make more than $100,000 a year. It all revolves around selling a ton of cars each month. You get paid for that.
*Niche brand dealerships, such as those for Jaguar, Porsche, Land Rover, and Ferrari, may or may not have a quota. It will rely on factors like their market size, employee count, etc. Additionally, they sometimes have smaller commission rates and monthly minimum guarantees.
In This Article...
How much does the top car salesperson earn?
Car salesmen in the US earn incomes ranging from $10,023 to $234,892, with a median pay of $42,645 each year. Car salesmen earn an average salary of $42,646 to $106,677, with the top 86 percent earning $234,892.
Which automobile salesperson earns the most?
Ali Reda broke the record for the most vehicles sold in a calendar year at Les Stanford Chevrolet Cadillac in Dearborn, Michigan, selling an amazing 1,582 vehicles. Salespeople fantasize about the kind of mid-six figure salary that would bring them. Entry-level auto salespeople may expect to make about $28,000 a year, according to CareerExplorer. Senior-level car salespeople make an average of $46,000 a year, while mid-level car salespeople typically make around $35,000. Less than 10% of vehicle salespeople make $65,000 or more a year or more. The sky is the limit for those who excel at it, though.
The average gross profit per vehicle for new and used cars is similar, at $2,400 for new and $1,900 for used, respectively. However, used car sales outpace new automobile sales by a 2 to 1 margin each year in the United States. There are more opportunities for used car salespeople to earn larger commissions based only on volume.
Although there are fewer opportunities to sell a luxury car, they have a higher potential for gross profit. How much commission does an auto salesperson receive when they sell fewer, more expensive cars? It usually averages out to be nearly identical.
The various sources of income that make up a salesperson’s total remuneration include:
Sales commissions
The commission earned by a typical salesperson who sells between 10 and 15 cars per month makes up the vast majority of their income. A salesperson promoting a mass-market brand in a prosperous metropolis might anticipate earning about $60,000 in commission annually. That is comparable to a salesperson for a luxury company who might sell six to eight cars each month at a greater gross margin.
Bonuses
Achievement incentives are sometimes included in pay systems in addition to commission or salary. Without respect to the gross profit per vehicle, a salesperson can receive an additional $500 for selling 10 vehicles in a month or a bonus of $1,000 for selling 14 vehicles. Every dealership has a different commission system, however this kind of element is present in many shops.
Spiffs
It’s likely that the car has a unique incentive, or “spiff,” for selling it if a salesperson has ever demonstrated one to you that doesn’t quite suit your needs but makes them look incredibly enthusiastic about it. To motivate salespeople to sell certain modelscars that have been sitting on the lot for too long, for instance, or overstock on a certain modelthe dealer imposes a premium. Spiffs, which are paid in addition to the commission on the unit, can range from $50 to $500.
Other spiffs include contests for the month or a specific day intended to generate buzz on the sales floor and tied to an incentive. That can apply to selling more than one car in a single day or selling the day’s first car. It truly depends on how creative the manager is.
If a salesperson is eager to take advantage of spiffs when they are offered, they can increase their annual profits by $10,000 only from them.
Demonstrator vehicle
Driving a demonstration, or demo, may not be paid for out of pocket by a salesperson, but it is typically included as taxable revenue on their check. Salespeople just have to pay for fuel and maintenance in exchange for using a dealer plate that includes insurance. A demonstrator generates a taxable advantage of between $4,000 and $6,000 over the course of a year.
Where do auto salespeople earn the most cash?
According to NADA, the sale of F&I items and service contracts on new and used cars accounts for close to 37% of a dealership’s gross profit. According to NADA, the service and parts division of a dealership generates 44% of its gross income.
Is working in auto sales stressful?
In addition to becoming an air traffic controller and a heart surgeon, selling cars is one of the most stressful professions.
You will have wasted all of your time working for nothing if you don’t generate enough sales. You’ll most likely get fired as well. It’s really hard to attempt to support a family on a car salesman’s salary.
Better have regular blood pressure checks. Some dealerships even have a portable defibrillator and a BP cuff in the break area (or at least they should).
What sales positions have the best pay?
10 best paying sales positions
Is it worth it to work as a car salesman?
Car salespeople have a wide variety of earning possibilities; according to PayScale, salaries can range from $19,000 to $84,000, with an average yearly salary of little under $40,000. The U.S. Department of Labor’s Occupational Outlook Handbook predicts that through 2026, the growth of sales employment would be slower than normal. With an expected increase in online and internet sales, growth in the sales sector is predicted to be in the 3% area.
Tip
To take advantage of consumers’ increased interest in making purchases online, some auto dealerships are gradually expanding their online sales departments.
How challenging are vehicle sales?
Below-average automotive sales professionals frequently believe that those who are successful are either lucky or have learned a secret to selling more cars for more money, a secret they are selfishly keeping from the rest of the herd.
Marginal salespeoplethose struggling to sell 610 units a monthoften wonder what “secret” individuals selling 2030 units are employing while also griping that the other person “always gets the laydowns.”
The same goes for managers and dealers who are battling to preserve profits while losing market share, who frequently think that the prosperous dealers in their district are either “giving away automobiles or they’ve found a hidden device that helps them move forward.
The tried-and-true best practices and standards shown to boost sales and grosses are quickly abandoned by substandard salespeople and dealerships, certain that there is some shortcut to success. They abandon the tedious procedures and metrics, choosing instead the ambiguity of deceptive tricks and fake motivation.
To see what sticks, they start tossing everything at the walla technique a buddy once called “strategies in search of tactics. It’s interesting to note that even when they hit upon a successful method, they make little attempt to codify it into a long-term strategy. They misrepresent the ease with which selling autos can be done. They disregard doing worthwhile work in favor of movingeven if that means moving the wrong way.
Selling cars isn’t difficult; it just requires effort. Boring activities that consistently produce positive results. You understand, work.
Stop Looking for “Tricks
It’s time to accept reality, whether you work in sales or management: there are no “tricks to selling cars.” Selling vehicles isn’t difficult, as you already know from reading this post; it just requires work.
The same prospects that average salespeople encounter are met by top salespeople. The CRMs and websites used by top dealers are also used by typical dealers. What distinguishes the top from the floppy center, then?
Simply put, when meeting a new person, top salespeople react differently than typical salespeople. Similar to how elite dealers respond differently to the tools they use than typical dealers. Top dealers use these tools to augment the responsibility that their supervisors promote and to support their written processes. Most vendors anticipate that the tools will handle the difficult tasks.
Top Salespeople
A common error of average salesmen is to compartmentalize their job and personal lives. When they are at the dealership, they are salespeople, but when they are not there, they are not working. Top salespeople, on the other hand, never stop working.
To be clear, this does not imply that successful marketers do not lead private lives. They actually lead better private lives than the majority of salesmen. They share their happiness with others since they are content with their line of work. They are aware that every person they come into contact with has the potential to become a customer. Top salespeople operate under the tenets of Assumptive Selling, treating every customer as though they are a qualified purchase. They are aware that the person in front of themwhether it is a waitress, a buddy, or a patron at the barwill purchase something eventually.
They are networking in the traditional manner. To let people know they now have a buddy in the auto industry, they are handing out their business cards to everyone they meet.
Top Dealers
The finest car dealers in Americathose who are increasing their market share and raking in above-average profitsdrive excellence from the top. The operating manager or dealer principal holds his or her staff accountable for living up to the standards they’ve established.
There are no enigmas or questions. In fact, individuals who report to them are aware of exactly what is required to succeed since they explicitly define expectations and consequences and strictly uphold these repercussions.
In these businesses, sales managers are held responsible for adhering to the policies and procedures set down from above. They can hold their teams accountable because of this responsibility. It’s not difficult; it simply requires effort. Actual leadership requires work.
Leadership is a process; there are no tricks or short cuts. Excellent people are curious about what is expected of them. Rule-followers are good individuals. Excellent individuals desire accountability as well as the benefits of their labor. Because these dealerships are run by managers who aren’t afraid to be leaders, great people want to work for top dealers.
Top salespeople and top dealers are motivated by labor, not luck, secrets, or giving away vehicles. After all, selling cars isn’t difficultit just requires work.
What should an automobile salesperson wear?
What to dress will likely be one of the first things you consider when applying for and landing your first car sales job. What is the exact “What should a car salesman wear? Is there a uniform dress code or does it differ from dealer to dealer?
The majority of dealers follow a uniform dress code that differs according to the seasons, although occasional variation from dealership to dealership. In the colder months, automobile salesmen should wear business casual (a button-down shirt, a tie, and trousers), and in the summer months, khakis and a branded polo shirt. Although there are still some dealers who insist that you dress in a suit every day of the year, their numbers are declining.
I underlined the need of dressing professionally in a recent piece on how to look put together and polished:
Why reading this article is advantageous “The focus of How to Look Put Together and Polished) is how your clients will perceive you. When you arrive at work with your hair neat, shirt ironed, and shoes polished, you project the image of someone who is there for a specific reason.