How Much Do Car Salespersons Make?

In this article we will look at the kind of money involved in being a car salesperson. How do they get paid, what are the perks and just how much do they make?

Qualities That Make a Good Salesperson

Anyone who has worked in any kind of sales understands that it is not as easy as some may believe. In fact the best salespeople need to have some very specific traits to really make it in high volume and value sales.

If you are considering getting into something like auto sales read on through this section to see if you might be a good fit:

  • Can engage customers: The key first step is the first impression. Customers are looking to be helped by someone personable and this initial greeting is vital to place potential buyers at ease.
  • Positive Attitude: Good salespeople will usually have a positive attitude at least when talking to potential buyers. Customers are not looking to spend money with someone who is miserable or just plain unlikeable.
  • Knowledge of the Product: In order to sell something you first have to understand what it is and be ready to answer questions without hesitation. This for car salespeople requires that you have a deep knowledge of the cars sold by the dealership so you can answer any questions the customer has and offer advice based on their specific needs.
  • Ability to Communicate: Car salespeople are very talkative and this is important. You are looking to create a connection and develop a level of trust. Communicating clearly and honestly is a good way to get that sale and future ones from the customer.
  • Good Organizational Skills: Paperwork in auto sales is extensive so it is important to have great organizational skills. You will want to be able to follow up with clients and know with ease the details of their latest purchase. Customers are frustrated if they feel their sales person is not organized.
  • Negotiation: Even when prices are set and you can not alter them people will try to haggle over the price of the vehicles. Some places may allow you to haggle back but others stand firm. Whichever it is you need to be ready to tackle this tactfully while still holding customer interest.

How Much Do Car Salespeople Earn?

As with many professions the potential earnings can vary for a number of reasons. In auto sales those just starting out might be making around $28,000 a year. As experience is gained and a sales record developed this can go up to $45,000 in basic take home pay.

Many car salespeople however work on commission which incentivizes them to make more sales. This means they get a percentage of the profits made by the dealer on any sales that they personally make. On average this may be about 25% of the profit made on the sale and perhaps a little extra if they also sold some automotive accessories as well. This can mean calculating a salesperson's pay a little trickier as there are often a few factors in play.

Sometimes a dealership will factor in something called a “pack fee.” This is a set amount that the dealership must get from the sale of the car no matter what the salesperson actually sells it for. As an example if the dealership sets a pack fee of $750 on a car then that amount will be taken from the profits of the sale before the salesperson's commission is considered.

A pack fee equation would look a little like this:

$2750 (profit) - $750 (pack fee) = $2000 (commissionable profit)

The salesperson would receive a percentage of the commissionable profit so it is in their interests to not allow the vehicle to be sold for too low a price. With pack fees the dealership makes sure they get their minimum cut of the profit before the salesperson makes a dime.

How Much Commission Can Car Salespeople Make?

If the salesperson is working solely on commission in auto sales often their percentage is based on volume of sales. In order to incentivize the sales team, dealers will often increase potential commission based on how many units they sell a month.

This is a rough average guide to help explain this:

  • 1-7 vehicles per month: 25% commission
  • 8-15 vehicles per month: 30% commission
  • 15-20 vehicles per month: 35% commission
  • 21+ vehicles per month: 40% commission

This can mean that salespeople can potentially make huge paychecks for being successful in selling cars.Generally speaking the percentage will be capped at 40% but the more cars you sell obviously the more money you take home.

How Do Salespeople Make Their Money?

When it comes to auto sales the way you get paid is not always the same it will depend on where you work. There are a few potential ways the pay will work so it is important to know the differences.

Fixed Salary

This is a structure that is usually used during training periods while new salespeople are learning the ropes. The assumption is that they will not be selling a lot straight away so they will have to be paid hourly at least for a while.

A few dealerships may have all their sales team on salary however this is not always a good business model. When you are paid the same for selling one car a month as you would 12 your incentive to work decreases.

On average a salaried salesperson might take home around $3000 a month. The only incentive they have to sell cars is that if they fail in their basic job they will likely lose it. This realistically means that they will often do the bare minimum to keep their job.

Commission

We have already looked at commission in this article but we should expound on that a little to clarify a few points. If the job is based on commission only this means if you do not sell any cars then you literally make no money.

This can create a high stress competitive environment and often requires you to be the best salesperson you can possibly be. The assumption that car salespeople can be a little sleazy often comes from their need to make sales.

No sales means no take home pay and although some dealerships will help their salespeople out and allow them a draw on future commissions this can be a slippery financial slope if they have a few dry months in a row.

Salary & Commission

The best case scenario is getting in with a dealership who offers an annual salary and a commission on all of your sales. When it comes to the salary it will probably be minimum wage but with the chance of earning commission there is incentive to make sales.

With this set up you might make about $1000 a pay period without making any sales which isn’t nothing but it doesn’t go far these days at all. If you are a successful salesperson however then you could be taking home more than $4000 depending on how many cars you sell.

Other Perks

Dealerships understand the need to keep their salespeople motivated so although they want to make as much profit for themselves they do often offer other perks beyond salary and commission.

Bonuses

Dealers will create a sense of internal competition for example by offering a bonus to the highest sellers. You may for example receive an additional $500 if you hit a sales target or outsell your fellow salespeople.

These bonuses often do not factor in the commission made on the sales as they are about moving volume of stock.

Selling Spiffs

Salespeople can often get a nice little boost in their pay by selling a car that the dealership wants off their books. This is known as a special incentive for its sale or Spiffs. These are often cars that have been sitting on the lot for a while taking up space.

If you have ever had a salesperson try and convince you to take a specific car that you may not have shown interest in, they are likely trying to sell you a spiff. This could be earning them an extra $50 - $500 depending on the car.

Another reason for a spiff might be a manufacturer incentive to move units. The dealership may be in line for a bonus if they move a certain number of a particular model or make. Some salespeople may even specialize in selling spiffs for those extra bonuses.

Use of Demo Vehicles

Have you ever seen cars driving around with dealer plates in them? These are usually demo vehicles which are used for test drives. Some dealers will allow their salespeople to use these demo cars for their own purposes.

The cars must be kept clean and the salespeople will pay for their own fuel but it is often a big saving financially. They may pay a small fee for this privilege or sometimes it is a free perk. In terms of benefits it might save the salesperson between $3500 - $6500 a year in the costs of having their own car.

Is it Hard to be a Car Salesperson?

The difficulty in this job is not a physical one but more in terms of stress. There are expectations with regards to sales performance but as long as you can close the deals and make money for the dealership things are often great.

It takes a special blend of personality to be truly successful, combining a likable personality with a forceful ability to sell. You have to push for the sales without irritating the potential buyers. With consumers seemingly getting angrier and more entitled these days it can be very hard to keep them happy.

How Much Do the Best Car Salespeople Make?

The average take home pay is between $3000 - $4000 per month for your average car salesperson. Excellent performers working with high end vehicles however could be making between $100,000 - $200,000.

Those top earners would be looking to sell over 20 vehicles a month every month. This is very difficult to achieve and takes amazing sales ability to pull off. It often takes years of experience to reach this point.

Conclusion

We may have an image of a flashy car salesperson who makes a ton of money but for the most part this is a facade. They need to exude success as part of their sales pitch but often they are not making the kind of money you might think.

A truly excellent sales person can make thousands each month but much of their pay may rely on sales. With a world still recovering from tough financial times it becomes harder to make big sales.

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