From the Series: Questions People Ask About Car Sales
Many people that buy new cars assume the car salesperson is making big money. That's why so many people are asking the question how much do car salesmen make on a new car. This is a very common question asked of internet search engines on a regular basis. Loads of people are punching up that search and none of them are getting an accurate answer.
The truth is that there isn't a set amount of how much do car salesmen make on a new car. On the low side (most common) the car salesman would earn a “mini” commission which could be $75, $100 or $150. A “Mini” is a fixed amount determined by the dealership. This Mini (or courtesy) commission is quite common since the Internet has taken such an active part of selling cars.
Scenarios of How Much Do Car Salesmen Make on a New Car
Typically a car salesman would earn commission which is 25 or 30 percent of the gross profit over dealer invoice, less the dealer pack (dealer cost of selling the car - maybe $400 to $800 on a new car).
Let’s break it down for you:
List Price $ 24,000
Dealer Invoice $22,200
Sale Price $21,500 - $700 under dealer invoice, very common today.
So the car salesman commission would be the profit over invoice, which is a negative -$700. Now for the dealer pack of let us say $600 is deducted. That leaves a negative -$1,300. So there is no profit which means no commission. Therefore the dealer pays a courtesy commission to the car salesman called a “Mini”. This is very common today and most cases answer the question how much do car salesmen make on a new car. Not much of a salary for selling a new car.
For the sake of illustration let's say that that car above is new and in high demand. This may allow the car to be sold for list price. So $24,000 less $22,200 equals $1,800 profit. Then take the $1,800 profit less the dealer pack of $600. That leaves a $1,200 profit and let's say the commission rate is 30% which equals $360 and 25% equals $300. Therefore in this scenario, it answers how much do car salesmen make on a new car.
When was the last time you were willing to pay list price for a new car?
To be fair I have sold many cars over the years and I have collected lots of Mini commissions, but have also sold cars that paid me well over a thousand dollars. However those times are few and far between, but they still happen now and then. There are several variables that contribute to making more money on a new car such. These include the price of the car, trade-ins, customer and dealer incentives and manufacturer to salesperson incentives. It's all part of the car salesman pay plan.
As you can see there are many variables that go into determining what car salespeople make when they sell a new car. Therefore there isn't a definitive answer to the question how much do car salesmen make on a new car.
Why Should What Car Salesmen Make on a New Car Concern You
On the other hand, do car salesmen come into your place of business and ask you how much you make working there? Do you go to an appliance store or grocery store and ask them how much a certain appliance costs the store? Or the grocery store and ask what they pay for milk or bread? For some reason and I don't know why, but the public thinks car salespeople and the industry should bare our soul. That we should give them all the answers. Could you imagine going to a restaurant and while you are ordering you ask the waitress what they paid for the steak you are thinking about ordering. So why should you ask how much do car salesmen make on a new car?
Later, Fresh Up on the Lot