How Much Do Car Salesman Make in Commisions Per Car
Home » What is the average Car Salesman Commission on new car sales? A Car salesman reveals commission on car sales
Are you interested in making a career in Car sales then we've got all the details for you about Car sales commission, salary, education requirements for becoming a car salesman and job profile. The commission on new car sales varies based on the car brand, car dealership and location but the usual commission for a car salesman is between 20-to-30 percent of the profit. The profit amount also varies from one dealership to another. The bottom-line is that the car salespeople don't earn a whole hell of a lot of money.
A car salesman at a dealership average about 10 car sales per month, and earn an average of about $40k per year. If you do the math, that's about $330 per car. Two factors account for this: sales that generate only mini commissions and the added cost of the dealer pack.
However, almost all dealership set a minimum commission for a car salesman which ranges from $75 – $100 per car sales. Car sales commission also varies from one sales person to another. An experienced car salesman selling over 20 car a month will make $6000 – $8000 per month while a salesman struggling to sell less than an average of 10 cars a month will make a lot less.
Job Profile of a Car Salesman
For a car salesman, commission is the main thing over a fixed salary. Your job is to sell as many cars as possible and take home a percentage of the gross profits. Salesmen are given a sales quota of between 8-to-12 units a month unless they're working at a dealership of a high-end brands like Jaguar, Land Rover or Lexus. If you exceed the number of car sales set in your quota then you can expect higher commission and a bonus as well. However, if you're selling less cars than your set quote, you may have to face the heat of losing your job. Some car dealerships even offer bonuses for pushing hard-to-sell cars. Car salespeople frequently work long hours, and the highest performers can earn over $100,000 per year.
Education Requirements for becoming a Car Salesman
For becoming a car salesman or a woman, you don't require any formal education or a college degree but you need to have good persuasion skills and selling skills. Many universities offer sales training courses which could help an aspiring car salesperson learn how to move more units. In this industry, the more you sell, the more you get paid.
Contrary to popular belief, the average car salesman salary is just that – average. According to the Bureau of Labor Statistics, car salespeople make around $46,990 per year, and none of that money comes easily. Most car seller's pay comes from commission, so there may be days where a salesperson works a full shift and makes no income. It all depends on their skill as a salesperson.
A car saleswoman's commission varies among departments. Most car salespeople make a 25-percent commission on gross profit minus a small "pack fee." This fee is typically around a few hundred dollars. All in all, the typical car salesman pay usually adds up to about $250 or $300 per car. Some dealerships have a minimum commission of around $125 per car.
How New-Car Sales Commissions are Calculated?
One has to remember that a car salesman at new car dealership will work primarily on commission basis, receiving 20-to-30 percent of gross profits, with 25 percent being common at most dealerships. However, it's a bit complicated to figure out how car salesmen are paid and how much commission is paid to them because it can vary from one dealership to another. For example, most new car sales have two stages, the sale itself and the financing of the sale, and the salesperson's commission is based on only the sale.
Another important thing to note here about the net profit on a new car sale is that often there is not a profit and that the dealer loses money on a lot of new car sales. You may wonder how the dealer stays in business. He manages to survive because he usually makes up the loss and more on the profit from the financing and the dealer's "pack".
Suppose, for example, that the dealer's invoice cost on the vehicle is $25,400. The average markup on a new car sale is surprisingly thin, only about 5 percent on a lower-cost vehicle and 10 percent on a luxury car. The 5 percent profit on that $25,400 car equals $1,270. The sales commission, which is 25 percent of the net profit would be $317.50.
But, there is a catch. Say the car in question is a 2016 model and in early 2018, the dealer's job is to get that car sold and off the lot before its value declines any further. The dealer may decide that the target price for the car is not the invoice amount of $25,400 plus the 5-percent commission or $26,670. It is instead listed at $24,000 or $1,400 under the invoice cost and calculated to get the car off the lot quickly.
As far as the dealer is concerned, this is a good deal. The back-end, which is the actual financing of the car might generate a profit of $2,000 or more, making up the loss on the front-end and leaving a minimum of $600 profit.
The outcome for the salesperson is not quite as satisfactory. Since there was no profit on the sale itself, there is no 5-percent commission either. Instead, the salesperson gets a "mini," which in auto-dealer parlance is a flat minimum amount on the sale. On this $24,000 sale, the mini might be no more than $125.
Car Salesman Reveals How Dealership Employees Get Paid and Why It Matters To Customers
Car Dealer's Pack
Another important factor that impacts the amount of commission a car salesman makes on a new car sale is "the pack." A dealer makes money on the "pack" which is an arbitrary amount added to invoice for preparation, carrying costs or any other cost the dealer chooses. It is just a way for the dealer to ensure he's making money by reducing the sales commission. If the invoice cost of a vehicle, for example, is $30,000, then the normal 5-percent profit would be $1,500 and the 25-percent sales commission on the sale would be $375. But if the dealer adds a $400 pack, the adjusted cost is $30,400 and assuming the sales price remains the same, the profit isn't $1,500, but $1,100. 25-percent of that amount, the adjusted commission after the pack and included in the cost, is only $275.
Small Bonus for Salespeople
If you look at the car sales profession in general, it is not a very high paying job and it will not make any car salesman wealthy. The fact is that an average car salesperson makes about 10 to 12 sales a month which also includes cars selling at a loss or a reduced profit that generates a $125 mini-commission and of other commissions reduced by packs added to the invoice cost which ultimately results in less commission for car salesman.
But if you look at the positive side, a car salesperson could make more money from bonuses. Almost, all dealership offer bonuses for selling a certain number of cars exceeding a set quota each month, or for selling add-ons like rust-protection and undercoating. Every dealer loves add-ons because the markups on add-ons are higher than for the car itself. A good car salesperson might end up with as much money in their pocket from selling add-ons as from the commission on the car sales.
We hope this post will help new entrants in the car sales industry to understand how much commission a car salesman makes and what are the prospects in the industry for new comers.
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References
https://work.chron.com/much-commission-salesman-make-new-car-21232.html
https://bizfluent.com/info-7755493-average-commission-rate-car-sales.html
https://www.bls.gov/ooh/sales/home.htm
https://www.payscale.com/research/US/Job=Sales_Consultant%2C_Automobile%2FCars/Salary
https://www.bls.gov/oes/2017/may/naics4_441100.htm#41-0000
How Much Do Car Salesman Make in Commisions Per Car
Source: https://advanton.com/car-salesman-commission/
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