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.
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Later, Fresh Up on the Lot
K.B.
I work for a Car Dealership and we’re paid on commission, We receive a flat or draw of $1,600 a month. I didn’t have a good month last month and only sold three vehicles with a total commission of $532.21. This morning I received my commission report and it reads I owe the dealership $1,067.79. Is what my employer doing even legal? I put in a total of 227.45 hours in for the month of January.
Yes, it is legal and that is why they call it a draw.
By law does a dealer ship have to give a written notice or sign a consent informing of a pack is added to each vehicle?
Never heard of such a thing.
I was just hired to work at a Chevrolet used car lot. The dealership gets great reviews, but I am very concerned about steady income. I do realize it is based upon my ability to sell cars obviously. I believe I can do it. What is an average monthly income for a used car dealer/salesman?
Is there such a thing where a salesman gets $75.oo for each car sold?
How do you make money on the “back end” ?
Usually you don’t. The back end is for the F & I person. However at some dealerships you can earn a small percentage of the back end.
Usually that is call a “Mini Deal” at most dealers, but some dealerships may have a different kind of pay plan that pays a wage plus $75.00 per car.
Sorry to say, but there is not a reliable number for the average monthly car salesman pay. It is all up to you, but a six figure income is definitely possible and not a pipe dream.
About “draw” checks & dealers that require you to “pay back” your negative debt from the month before.
PART 779—THE FAIR LABOR STANDARDS ACT AS APPLIED TO RETAILERS OF GOODS OR SERVICES:
§ 779.416 What compensation “represents commissions.â€
Maybe someone would like to google this act and see how it stands up to the laws in there state. Nobody should EVER owe an employer after punching in/out and being required to work certain hours. Even a waitress makes a certain wage before tips (her style of commission). Sales “professionals” should have rights like others that are in the work-place. With unions come rights. Fair treatment and pay should be expected from any employer.
Sorry, but that is how it usually works.
@Jimmy–You’re being paid a commission on sales, not an hourly wage. Therefore, paying back against the draw is LEGAL because that money has not been “earned”. Had it been earned as an hourly wage, then NO, that money cannot be paid back.
I hope that clarifies things a bit!
This “unfair” practice is legal because car salesmen are typically hired as independent contractors and not employees. It’s a commission-only environment without a base wage. The draw is meant to help ease the pain of having a bad month knowing that it’s possible to turn around right and have an outstanding month if you can make it until then.
In California, does a car salesman have to register with the DMV?
Does a majority of dealerships practice that “draw” against your commission? and if you did have to pay your dealership and didn’t have the funds to do so how will that work out?
I have a friend who works at a dealership, who’s contract states he gets 25% commission of the front end. However, he has showed me commission vouchers that show he is not getting that percentage. ALSO, his Financial Director is listed as a salesman S1/S2 on the ” J-screen , a ledger showing Dealer Cost, Sales Price, Pack, etc. I have two simple questions:
1) Can a Financial Director receive part of front end commisssion
2) Is there an industry standard for calculating commission? Need to find out what his commission should be based on his 25%.
Thank you for your asssistance
BM
Does anyone know anything about being able to claim on your taxes, the amount of commission you loose from the pack?
Sorry, no such thing. It is part on the dealers pay plan and not an expense to you.
Hi Billy,
There isn’t any standard when it comes to car salesman pay plans. Every dealer does it a little different than the next. Sometimes it is better to move on to another dealer than fight their system.
Hi Chris,
Many dealers use a draw system, but the draw does always have to be paid back in full each week. Some dealers will spread it across several weeks.
Hi Debbie,
Here is a page on the site about a car salesman license.
I noticed the comm. range and know that it can be different from dealer to dealer. I have sold cars for years with large dealerships offering new and used vehicles. My question is:
What type of comm., perks, bonuses etc. should try to negotiate when taking a job with a smaller used car dealer?
If you can negotiate I would go for the largest percent of gross profit, demo and benefits.
I work for chevy and they recently started taking money out of my paycheck for fixing a car that I soled to a customer. He wanted the car because it was inexpensive and very low miles but it didnt start all the time. They took $175 from my check to fix it. It that legal?
It could be. I has to do with company policy and the state where you work.
To reply to D. Davis… if you work 227 hours in a month and only sell 3 cars, you may have been at work for 227 hours but you surely weren’t WORKING for 227 hours. The national average is 8 cars. Ask for help, turn customers and take more ups. If you take one up per day and turn them to an experienced salesperson and get half a deal and they sell 3 of the 6 you turned, you would have sold 6. GET HELP AND LEARN YOUR CRAFT!!
I just started working for a dealership about 3 weeks ago. I’m new in the car industry so I don’t know much about it. I want to understand more about it and the way we get pay. My commission is 25% in the front and 5% in the back. My question is how can you find out if it has gross profit cause when we close a deal or sell the car we don’t know the invoice price only the msrp price. All dealership don’t tell their sales people about the price of the car. I find out my commission about a week later after is closed and funded. Can you some explain that to me?
thank you
I just started working for a dealership about 3 weeks ago. I’m new in the car industry so I don’t know much about it. I want to understand more about it and the way we get pay. My commission is 25% in the front and 5% in the back. My question is how can you find out if it has gross profit cause when we close a deal or sell the car we don’t know the invoice price only the msrp price. All dealership don’t tell their sales people about the price of the car. I find out my commission about a week later after is closed and funded. Can someone explain that to me?
thank you
You should talk to one of your managers and find out what policy is at your dealership. They should also have a written explanation of your car salesman pay plan.
I have sold cars on and off for approx. 3 years. I have seen every diabolical method by managers, GSM’s, and of course sales managers. It is horrible how salesman (woman) are treated, and the bottom line is how much do the managers make, do they like their demo, and is the owner happy with the sales? I find that even salesman v. salesman are fighting for ups and gross, and customers so it has become an all out war as to who gets the up and who gets the opportunity to sell a car. And of course, how many ways can the dealership screw you on the back, front, or inbetween!!!!!! The bottom line is have integrity, do your job, and screw the bad element in the industry, and hope to have a small percentage of good people as in every line of work, that you can relate and work with to make your job and your life a little easier. Good Luck
Spend more time learning how to sell rather than googling labor laws…. A sales career is not for the faint of heart but a positive attitude and a great work ethic you won’t even need to worry about the draw.
The truth is if you need the draw to live it may be time for a new profession. I work at a dealership with no draw. I’ve also worked for one with a draw in the past. The dealerships that pay a draw tend to have less motivated salesmen. Lean your craft, sell cars and you won’t care about draw or how much you get
Dear All,
My boy friend just started work at a dealership. He sold a car a couple of days ago. Upon receiving his commission, another salesman indicating that the same customer brought a car from him 5 years ago, and therefore he want to get a share of the commission (he wanted $250 of the total $1000 commission). My boyfriend did all the work, and this guy did nothing. My question: 1. Is he entitle to the commission? 2. If yes, how much he is entitled to. My boyfriend consulted the situation to his manager, but the manager did not want to get involved.
Greatly appreciate your comments/advise.
Hey Lot dogs!!
Been in the biz for over 20 years and the hogs up top will ALWAYS steal from you…that’s the way it has been and will NEVER change. Working the 227 hours is not necessary to make a solid income of 8-9k a month. That is a part of the business that I can never get used to…the hours are terrible, hopefully we work with people we like!
Sorry to hear those kinds of stories. There is a section in my book about earning respect in the car business. I don’t know all the details, but some dealerships have some pretty crazy policies that don’t make any sense and give the car business a bad name.
Sorry you feel that way, but you are right. That is why it is important to become one of the top car salesmen or women at your dealership.
Hello,
I am new to car sales. Just hit my 90 day mark at a small new/used dealership.
I make 400. a wk salary and 100. a sale no matter if it is new or used. On top of this we have other small bonus marks to hit depending on how many cars we hit monthly 500-1500.
I sold 10, 11, 12 cars in these 3 months.
No demo, no percentage of sales or extras. How does this sound to you car sales veterans? I like the work and feel if I can hit 15 cars a month consistently; I will be in a nice position to negotiate down the line. Please advise. Thank you.
Sounds like you are on your way. It might be tough to earn six figures a year with that pay plan, but once you learn the business you could go anywhere.
Good luck and and you are doing great for the first 90 days.
This was nice reading, I see a lot of green pea’s on here, and it’s a shame they are on here instead of worrying about catching an up. I couldn’t agree more with the guy that said if you are worrying about your draw, you need to find a new line of work. As for the guy that sold 3 cars for the month… I am shocked you weren’t fired. As for the girl that asked about her boyfriend and giving “commission” to the guy that sold the customer years ago… NO! Don’t do it. Your boyfriend earned the commission, it is his. If the customer didn’t ask for him, than he get’s NOTHING. He is trying to take advantage of a new guy. If he gives in, he will be finished at that dealership.
I have been selling for over 12 years, I love it, make 90 to 120 a year. The worst part of this job is the hours, and working every weekend. Other than that, the money is good, the job (can be) fun, and it is easy work.
I am 32 years old. have been working in the car biz since I was 14 as a porter my dad was the GSM of. 18 years later I am the used car manager of a VW store for the 16th largest dealer group in the US. during the many years pounding the pavement had many different payplans. I’ve never had a salary and always refused the draw. in sales I never made less than 50k a year and have made as much as 120k. to clarify one of the points mentioned, yes, having to pay back a draw is legal, they have basically paid you your commissions in advance, the fact that you sold 3 cars and only made 500 bucks is nobody’s fault but your own. if you paid me in advance for a job I never completed, you would want your money back right? same deal here. point number 2, the money they took out of your paycheck is called a chargeback. you sold a car and paid you a commission on the profit, If the profit changes because you can’t handle a beef on a cheap used car that was sold as-is you will participate in the adjustment of profit. lastly, all of you people talking about labor laws and unfair practices and who’s trying to screw who; if you don’t like the way it works: STAY OUT OF OUR BUSINESS! it’s greenpeas like you who constantly waste my time training you and then you just up and quit because you 1. don’t have the motivation to make it in this business 2. you aren’t hungry enough to hustle 3. have no business “trying it out” because some one told you you could sell anyone anything. it’s not a job, it’s your business and you should treat it like one, the harder you work the more you make, it’s not just putting in time. I made $20k one month selling hondas, sold 30 of them and probably worked 300 hours that month…. it is what it is. if you don like it, go punch the clock at mcdonalds or better yet Starbucks.
@Ret….. that’s sounds like a decent payplan for someone just starting out. how much money did you make off of 12 cars? around $4000? 1600 salary, 1200 commissions and maybe 1000 unit bonus? usually any dealership that pays a salary pays less commission or flats. hard to make big bucks that way, you make money by holding gross and getting a percentage of it. get yourself acclimated to the business and then go to a dealership that pays 25-35 percent and then sell 12 cars. if they hold gross on their deals your income will double.
Hope this helps some of the posters that are new to auto sales; this is a numbers game, and if you don’t work the numbers they will work you.
With any dealership or pay plan you must look at how it’s set up and what units are going to pay the best. If your dealer is adding addendum items to the cost of the new car like scotch guard or pinstripes and charging the deal hundreds of dollars you may never make over a mini selling a new car unless you aggressively market units that qualify for a bonus.
If the managers are desking deals on payments, they can short the front end gross by adding points or GAP to the back. so keep it “your deal by holding back on the trade or adding aftermarket.
If every used car gets run through service hundreds of inflated dollars will be added to the cost of the car, so pay attention as cars go through service.
Walk the back lot every morning looking at yesterday’s trades, if you see the right unit make your customer call on it ASAP before it can go through service.
Your manager is responsible for dealer profit; you are responsible for your paycheck
Hi, I recently interviewed for a position at a car dealer. I don’t have any experience in selling cars but I have worked in customer service for 7 years and feel that I can be quite successful at it and have the drive to be great.
The dealership has 2 lots (1 for new cars and their main one, and the 2nd is their used lot and just opened). They want me to work on the used car lot to gain experience. The manager told me they have 2 sales men and I would be the 3rd and they do about 25-30 cars a month. The dealership pays on commission where its $200 for each used car sold, with incentives coming at 5 cars sold a month is an extra $100 per car, 7 cars is an extra $150 per car and then 10 cars is an extra $200 per car, so selling 10 cars one month would get me $4000 gross. But they also do 10% of any packages/accessories sold with the cars such rustproofing and trailer hitches, etc.
I was wondering if you think this sounds like a decent place to start at, and with the commission being the way it is and possibility of this dealership growing as big as their new car lot?
Thank you for all your help
I am considering being a car salesman but the only thing holding me back is the lack of experience. I do not have any experience in sales and I am wondering if I will make it in the car sales world? I know I will never know unless I try but after reading about the draw, I am a bit scared. I keep thinking, if i do well then I can make a lot but if I am not cut out for this kind of job then I will have to pay them money back (which I don’t have). I guess I am having trouble deciding if I really want to pursue this. Half of me really wants to try it and see what I can do, but the other half is scared that I will have to pay back money that I don’t even have. What should I do?
Hi Eric,
Being successful involves risk and becoming a car salesman is no different. Stop worrying about the draw and paying back money. Just get it out of your head and don’t even make it a possibility.
Starting fresh without experience is usually the best way because you don’t have to break any unproductive habits.
If this is what you want to do, then do it and give it 100% and nothing less. Then after 90 to 120 days you can decide if you are cut out to sell cars for a living, but during that time there is no looking back only forward. The rewards are great and you can make great money. Not to mention that you will have a career that will allow you to work anywhere in the country.
Hi Ryan,
The ultimate decision is yours and whether you think you would like the arrangement. It doesn’t sound too bad and great for a beginner. Remember that once you have experience you can go anywhere.
Good Luck
KB
Thanks Jimbo,
Great stuff!
Thanks Justin,
A firm, but fair analysis.
KB
Thanks Dan,
You make good points.