In my efforts to provide you with more insight to the car business, I will show you how your car salesman pay plan works. At most car dealers throughout the country you car salesman gets paid by 100% percent commission. There is no such thing as a car salesman salary. If they go to work all day and do not sell a car, they do not get paid. I have seen less experienced sales people work 50 hours or more in a week and not sell a car. Yes, they do not get paid…..zero…zip…zilch. Obviously that is not the case of the average car salesman, but is very common for a newer salesman.
Car Salesman Pay and Earnings
That is why you may feel like you are being attacked by vultures when you enter a new car showroom or car lot. The car salesman’s pay plan works similar to nature’s code of “Only The Strong Survive”. This is also the reason that the car sales business has such a high turnover rate for salesmen. The more experienced and professional salesman are at the top, with some making six figures a year. On the other hand it is very hard for someone new to reach that level of income without some natural sales skills. The car salesman’s pay plan rewards the top performers and can leave the inexperienced not making enough to survive.
Car Salesman Pay Plan
Your car salesman’s pay plan works like this:
(this will vary between dealers but most are similar)
Salesman will get paid 25% of the gross profit of the front end. (front end = profit from selling the car)
The gross profit is the difference between the selling price of the car and the cost of the car, “less the pack”.
Pack is a fixed amount per car that the dealer keeps from the profit to pay for overhead. Depending on the dealer an example might be: $500.00 pack on new cars and $600.00 pack on used cars. That amount will be taken out of the profit first, then the salesman gets paid 25% of the remaining profit. (I have seen the pack ranging anywhere from $300.00 per car to $1200.00 per car depending on the dealer)
To illustrate the car salesman’s pay plan:
They sell a car and the front end profit is $1500.00.
Less pack of $500.00, payable profit is $1000.00
25% of $1000.00 is $250.00 and that is salesman’s commission.
Depending on the dealer’s car salesman’s pay plan the front end commission can range from 20% to 40%
Some dealers will pay a flat 30% percent no matter how many cars they sell while others will pay 20% for the first 5 cars they sell and 30% for cars 6 through 10, 35% for cars 11 through15 and 40% for 15 on up.
There are times when a dealer will sell a car for zero profit, yes “0″. Sometimes in an effort to just move the car out they make NO profit. In this scenario the car salesman’s pay plan pays them a “Mini”. A mini is a feature of the salesman’s pay plan that allows for transactions that do not make a profit or very little profit. A mini would pay the salesman a flat figure based on what the dealer and the salesman’s pay plan allows. I have seen this range from $50.00 to $150.00 per car depending on the car dealer.
Car Salesman Pay Plan Bonus
The next part of the car salesman’s pay plan may include a monthly volume bonus on top of the percentage of profit. Again this varies from car dealer to car dealer, but the idea of rewarding top performers is the same.
An example might be:
Sell 12 cars a month and get $500.00 bonus
Sell 15 cars a month and get $800.00 bonus
Sell 18 cars a month and get $1000.00 bonus
Sell 21 cars a month and get $1200.00 bonus
and on we go, you get the idea.
A good sales person will sell approximately 20 cars a month.
Car Salesman Pay Plan Extras
Another part of the car salesman’s pay plan are the add-ons and accessories. Add-ons are items or services such as rustproofing, undercoating, paint sealer and fabric protection. Accessories may be remote start, sunroof, towing hitch and similar items. This is not the best paying part of the salesman’s pay plan, but for a good salesman this could possibly add another $600 to $1000.00 a month.
I hope this explanation of the car salesman’s pay plan gives you some insight to the behavior of car dealer sales people. You can probably see why the car salesman is not above any car dealer scams. You can also understand when a sales person is a little more aggressive at the end of the month to sell a car. They may need one more car for the month a reach a bonus. A professional and competent sales person will not act like a vulture when you approach the car dealer lot or showroom, they will usually provide you with a respectable experience any time of the month.
Don’t forget the questions to ask when buying a car!