How Much Do Car Salesmen Make in 2024

How Much Do Car Salesmen Make

Introduction

Selling cars is often seen as a lucrative career. But in reality, the typical car salesman salary is much more modest than the glamorous perception. A car salesperson’s income depends on various factors like experience level,

dealership pay structure, vehicle prices, and monthly sales performance. By understanding how commission and pay plans work, you can get a clearer picture of what auto sales professionals truly earn.

How Car Salesmen make are Paid

Car salespeople are most often paid a modest base salary or hourly wage plus commission on vehicles sold. This provides guaranteed income security but ensures pay increases directly with sales productivity. Commission varies, but 15-25% of a car’s gross profit is typical.

Gross profit is the difference between the sales price and what the dealer paid for the vehicle. On a $20,000 car with a $18,000 dealer cost, sold at full asking price, the gross profit is $2,000. With a 20% commission rate, the salesperson would earn $400 for that sale. In high volume stores selling 10+ cars a month, that can add up to a decent income. Luxury vehicles with higher gross profits offer larger commissions per sale too.

Some dealerships pay commission on the vehicle’s total selling price without subtracting dealer cost. This inflates commission payouts but reduces the commission percentage. Others may use a tiered payout system based on monthly sales levels, rewarding higher productivity.

Salary vs. Commission Pay Structures

Car salespeople are typically paid using one of two structures:

Salary Plus Commission – This provides a flat guaranteed monthly salary like $2,000-$4,000, plus a percentage commission on each unit sold. The base salary acts as a safety net for salespeople even in slow months.

Straight Commission – A set percentage commission is paid per sale, anywhere from 15-30% of gross profit. No base salary is provided, so pay is tied directly to sales. Slow periods mean smaller paychecks.

High performers tend to favor straight commission so their pay rises quickly with sales volume. But salary plus commission offers income stability for newer salespeople still building a customer base.

Salary Vs. Commission Pay Structures Salesmen Make
Salary vs. Commission Pay Structures

Additional Performance Incentives

Along with commission, dealerships usually offer additional performance incentives and bonuses, such as:

  • Volume bonuses – Bonuses for selling 10, 15, 20+ units per month. For example, sell 12 cars and get an extra $1000.
  • Gross profit bonuses – Extra payout if a sales target for total gross profit on vehicles sold is achieved.
  • Manufacturer bonuses – Makers like Ford and Toyota offer dealership sales bonuses for moving certain models or volumes. These are often shared with high-performing staff.
  • Customer satisfaction bonuses – Positive online reviews and survey scores can earn salespeople bonuses of a few hundred dollars.
  • Finance bonus – Some dealers pay small bonuses of $50-$200 when customers finance through the dealership.
  • Demo bonuses – Additional payout for putting sold customer demos into theUsed inventory for resale.

These incentives encourage salespeople to prioritize volume, gross profit, survey scores, manufacturer targets, and other key performance metrics.

Estimating Monthly Earnings

With many pay variables, exact incomes for car salespeople vary widely. But here are some realistic monthly scenarios:

  • Average seller – With a salary of $3,000 plus 20% commission, selling 8 cars at $2,500 average gross profit per unit yields around $7,000 monthly.
  • New seller – With a $2,500 salary and 15% commission, selling 6 cars at $2,000 profit each earns approximately $5,700 per month.
  • High performer – No salary but 25% commission, selling 15+ cars with $3,000 average GP results in $11,250+ monthly.
  • Luxury seller – With higher new car prices and GP, selling 8 units at $4,000 commission each brings earnings of $10,000 or more just on commission.

Bonuses, demo sales, and finance reserve could realistically add 10-20% or more to these baseline pay amounts. The table is set up for hard workers to earn six figure incomes at many dealerships. But it takes time to build a clientele, learn profit maximization tactics, and gain experience.

Estimating Monthly Earnings
Estimating Monthly Earnings

Factors Affecting Earnings

Several important factors impact how much an individual car salesperson earns:

Experience level – It takes time to build expertise, customer rapport, and sales skills. New salespeople earn less while learning the ropes.

Vehicle types – Luxury and high-margin imports generate more gross profit per sale than mainstream brands.

Monthly sales – More units moved means more commission payouts. High performers sell 15-25+ vehicles monthly.

Commission structure – Salary guarantees income but caps commission potential. Straight commission compensates top sellers best.

Customer satisfaction – Positive surveys and online reviews drive repeat and referral business that boosts sales.

Economy – Vehicle sales are very cyclical with economic swings. Sales volume drops in downturns.

Dealership pay plan – Compensation structures vary greatly between dealership groups and brands.

Geography – Major metro areas see more sales potential than small towns. Popular coastal regions often pay better.

Selling cars can be a lucrative career when the right conditions align. But it requires cultivating sales abilities and outworking competitors at a high-volume, high-quality dealership.

Factors Affecting Earnings
Factors Affecting Earnings

Estimating Commission on a Sale

Salespeople can estimate their commission payout on a given sale using a few key pieces of information:

  • Vehicle sale price
  • Dealer vehicle cost
  • Established commission percentage rate
  • Gross profit = Sale Price – Dealer Cost
  • Commission = Gross Profit x Commission Percentage

For example:

  • Sale Price: $30,000
  • Dealer Cost: $27,000
  • Commission: 25% of Gross Profit
  • Gross Profit = $30,000 – $27,000 = $3,000
  • Commission = $3,000 x 0.25 = $750

Having an idea of gross margins on certain brands and models helps sales staff calculate potential commission as they work a deal. Those numbers motivate the drive for maximum purchase price.

Good and Bad Pay Scenarios

Given the commission-driven nature of the job, car sales salaries often vary dramatically. Here are examples of pay scenarios in good months and bad months:

Good Month

  • Sold 14 mid-range vehicles at $3,000 gross profit each
  • 25% commission yields $10,500
  • Plus $2,500 salary and $1,000 volume bonus
  • Equals $14,000 total pay that month

Bad Month

  • Sold only 5 used cars at $2,000 GP each
  • 20% commission yields $2,000
  • Plus $2,500 salary with no volume bonus
  • Leads to just $4,500 total pay that month

This demonstrates the ebb and flow salespeople experience. Most earn a livable wage over time, but 1-2 bad months can significantly hurt income. The highest performers maintain consistency month-to-month.

Moving into Sales Management

After gaining experience, talented car salespeople may advance into sales management roles like Finance Manager, Sales Manager, or General Sales Manager. This comes with added responsibilities and pay benefits:

  • Oversee teams of salespeople and collective dealership sales
  • Ensure sales staff have proper resources, training, support
  • Motivate through contests, bonuses, and compensation strategies
  • Track performance metrics like volume, gross profit, survey scores
  • Hire and build a highly effective sales team
  • Ensure high ethical standards and customer satisfaction
  • Liaise between sales staff and upper dealership management

Sales managers earn a higher salary in the $75,000-$120,000 range and bonuses based on their department and store performance. But it requires proven leadership abilities on top of selling skills. Demonstrating the capacity to manage and motivate a sales team is essential to earning a promotion.

FAQs

How much do most car salesmen make per sale?

The average commission per car sold is $200-$300, but high-end dealerships can pay $500 or more per vehicle. Luxury brands offer higher commissions due to larger gross profits.

Do car salesmen get base salaries?

Many dealers pay a modest base salary around $2,000-$4,000 per month to cover living expenses. But straight commission with no base is also common.

Do car salesmen make hourly wages?

Most dealerships pay commission rather than hourly, but some may guarantee minimum wage for the first few months until a new salesperson builds up clients.

How do car sales commissions work?

Commissions are usually 15-25% of the gross profit, which is the difference between the sales price and the dealer’s cost. More profitable vehicles pay more.

Do car salesmen make get benefits?

Most dealers offer benefits like health insurance, 401K plans, vacation pay, vehicle discounts, and other perks. Benefits improve at high-end luxury and import dealerships.

How much do car salesmen make on used cars?

Used vehicles have lower gross margins, so commissions are smaller per unit compared to new cars. But high used volume still allows sizable monthly earnings.

Do car salesmen get spiffs?

Spiffs are small bonuses of $50-$200 for things like selling finance contracts, service plans, and particular makes or models.

How long do car salesmen go without pay?

It’s not uncommon to go several weeks with little or no pay while establishing a clientele. Savings helps cover costs before commissions start coming in.

Do car salesmen earn salary plus commission?

Many dealers pay a modest base salary to cover living expenses along with commission on sales. But straight commission-only pay plans are also widespread.

Conclusion

While car sales careers are often glamorized for high earnings potential, the reality depends greatly on performance, experience, and pay structure. Establishing a large customer base and delivering consistent sales takes time. But the opportunity is there for high performers to join top-tier dealerships and earn an excellent living in automotive sales.

Understanding the mix of salary, commissions, and bonuses at play is important in evaluating dealership job offers and income potential. With hard work and perseverance, an auto sales career can ultimately provide the income security and financial rewards sought by those drawn to the business. But it requires cultivating all the abilities of a truly professional sales representative.

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