Car Salesman Commission the Way it Works

Here at the Car Sales Professional Blog we get lots of visitors that want to know more about Car Salesman Commission or how car salesmen get paid and how it works. Some of the visitors here are people considering a car sales career and some are Newbies or Green Peas. People that are new to selling cars for a living have many questions and concerns when it comes to car salesman compensation and pay, working on commission and not having a paycheck that is exactly the same every week. I get many emails that ask what does a car salesman get paid. Regardless of how hard they work or don’t work they feel better when they know how much their paycheck will be every Friday unlike the mythical car sales salary. That’s why so many people ask how much do car salesmen make.

Choosing a Car Salesman Commission or Not

The good car salesman that has been selling cars for any period of time couldn’t imagine a car sales salary or getting paid any other way. The car salesman commission reflects the exact amount of labor, experience and skills used throughout the week or month to sell cars and accessories (in most cases). There is no question that your paycheck can vary greatly from week to week and be influenced by the time of year, weather, manufacturers specials or a whole list of other things. But you have to ask your self would you rather make $40,000 a year and have the exact same paycheck every week or would you rather have your car sales commission check vary greatly from week to week and have a car salesman income of $100,000 a year. Sounds like an easy choice to me. I personally love getting paid on commission because I can control my annual income rather than a job classification, contract or seniority. If you get a fixed car sales salary then you are missing out on the benefits of car salesman compensation .

Car Salesman Compensation or How Do Car Salesmen Get Paid?

I will start right of by telling you that almost every auto dealership sales commissions and compensation pay plan that I know is slightly different than the next. However I will give the overall idea of how and what does a car salesmen get paid and how a sales commission and pay plan works, which in no way is a car sales salary.

To answer the common question of what percent does an auto salesman make on a car I will start off the commission of car salesmen and car saleswomen is based on a percentage of profit on the “front end” of the deal or car sold. The front end is the difference between the dealer’s invoice cost and the amount the customer paid for the car you sold. As an example: you sold the car for $20,000 and the invoice cost was $18,000. The front end profit is $2,000. How ever there is also a charge that is called “Pack” or “the Pack” that is assessed to each car for the dealership’s overhead. This is to pay for porters to clean the cars, lot maintenance, office people, paperwork, etc. This pack is different for every dealer and I have seen it go from $300 on a new car to $800 on a used car. Some high line dealerships have a “pack” charge that is $ 1400 or more. So to get back to our example the $2,000 profit from above is reduce by the “pack” charge for lets say $500 which leaves you with a commission-able profit of $1500. Now your $1500 profit is used to determine your auto dealership sales commissions and compensation.

The next step of figuring your car salesman commission or how car salesmen get paid is determined by your dealership. I have seen auto dealership sales commissions that pay anywhere from 20% up to 40% commission which is solely up to the dealership management and owners. For an example we will use 30% rate. That means that 30% of your “front end” profit or $1500 equals $450. Not bad for one sale, but what there is much more involved when it comes to car salesman compensation.

Let’s take the example of the car above where the invoice cost is $18,000 and you sold the car for $18,200. Now when you subtract the “Pack” of $500 you have a ($300) negative amount of “front end” profit. This example is known as a “Mini Deal” or “Mini” where the dealership decides to sell the car for a very low profit and there is nothing left for the car salesman commission.  When this happens there car salesman get paid a “Mini” which is also different at every dealer. I have seen “Minis” pay anywhere between $100 to $200 to the salesman for selling a “Mini Deal”. If all your deals were “minis” you would have to sell quite a few cars to make any money for the month.

Bonuses, Incentives and Car Salesman Commission

To move along, another part of a car salesman commission that you can control are the sale of extras or add-ons that can earn you an incentive. Not all, but many auto dealership sales commissions plans allow the car salesmen to sell things like rustproofing, paint protection, fabric protection and undercoating. These are often sold as packages and the sales person can earn an extra $50 to $200 for selling one of these packages. The next thing that a car salesman can sell are accessories for the car they just sold. Things like remote starts, sunroofs, body molding, splash guards, trailer hitches and entertainment systems just to name a few. Some dealers add these accessories to the deal and pay car sales commission on the profit of everything and some dealers pay a fixed amount for each item sold. Either way it is a chance to make some more car salesman income.

Next on the list are car salesman bonuses which added to your car salesman commission can make a big difference to your auto salesman compensation and personal bottom line. Once again, bonuses are different at every car dealer across the country and not all dealers have all the bonuses I mention, but most have something similar. Bonuses are the extra incentive to reward the top sales people and the most successful car salesmen or women that are the top producers for the dealership that go beyond auto dealership sales commissions.

Car Salesman Commission Bonuses and How Car Salesman Get Paid

Here is a list of some of the ways car salesmen get compensated in the form of bonuses that I have seen at various car dealers that are above and beyond their regular auto dealership sales commissions.

Salesman or Saleswoman of the Month: $100 to $400 (most cars sold)

Monthly Car Count Bonus: Sell 10 or 12 cars and get a $300 bonus, 15 cars sold get $600, sell 18 cars and get $900, sell 21 cars get $1200, sell 24 cars get $1500, sell 27 cars and get $1800. Again this amount will vary and is not a program at all dealers.

Sell Certain Cars: Management may select certain cars that are aged and hard to sell, so when you sell any of those cars you a bonus of $50 to $150 extra.

Sliding Scale Car Salesman Commission Percentage: When I talked amount the commission percentage above I used 30% as an example, but some dealers use the sliding scale in order to motivate their sales people to sell more cars. An example of a sliding scale percentage pay plan is as follows. Sell 6 cars get 20% commission, sell 9 cars get 25%, sell 12 car get 30%, sell 15 cars get 35% and sell 18 or more and get 40%. You can clearly see how this sliding scale auto sales commission pay plan rewards the top sellers in a dealership.

Miscellaneous Bonuses: Car dealers can have any number of different bonuses that are used to motivate their sales people. I have seen Saturday Bonuses for most cars sold, weekend rewards for most cars sold, extra money for cars sold on a holiday…etc.

Manufacturer Incentives as Car Salesman Compensation: There are several manufacturers that offer incentives the dealership sales people that are paid directly to the sales person. Some (not all) of the car makers require a sales person to take some of their car sales training classes and become “certified” or some other term that will register them with the factory and when a new car is sold by that person the factory will pay them a bonus. I heard of one sales person at a dealership that received more than $30,000 from the factory over the course of a calender year. Now that’s real money that can help you make a six figure income.

How Much Do Car Salesmen Make?

Selling cars is about the numbers and if you are trying to figure out what kind of money you can make over the course of a month you should know that every deal is different and so is the auto salesman commission. Over the course of a month you can figure that your deals can probably be classified in thirds. One third “Minis”, one third average and one third nice front end grosses or commissions. As you can see the car salesman compensation does not stop with commission and that is why a successful car salesman can earn over a $100,000 a year which is some serious money. That should be a sufficient answer for those that wonder about how much do car salesmen make and auto dealership sales commissions.

I hope this helps you understand how do car salesmen get paid and the basic structure of a car salesman commission pay plan. I hope that helps all of you that have asked what does a car salesman get paid and what percent does an auto salesman make on a car. There are several opportunities for the car salesman to make big money and many other automobile sales careers that have big earning potential.

How much do car salesmen make? They make as much as they want! -  Read the Car Sales Manual and learn how to make more money selling cars!

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Later, Fresh Up on the Lot
K.B.