If you’re curious about how much car salesmen make from their commissions, you’re not alone. Understanding car salesman commissions can help you grasp how earnings are structured in the automotive sales industry. Here’s a comprehensive guide based on my experience with the topic.
What Is a Car Salesman’s Commission?
A car salesman’s commission is a percentage of the profit or sale price of the vehicle they sell. This payment structure incentivizes salespeople to close deals and meet sales targets. The way commissions are calculated can vary depending on the dealership and its policies.
Common Commission Structures
1. Percentage of Sale Price
The most typical commission structure involves earning a percentage of the vehicle’s sale price. Usually, this ranges from 20% to 30% of the dealership’s profit on the sale. For instance, if a car sells for $30,000 and the dealership’s profit is $2,000, a salesman with a 25% commission rate would earn $500.
2. Flat Fees
Some dealerships offer a flat fee per car sold instead of a percentage. This can range from $100 to $500 or more. Flat fees provide a more predictable income but might not be as lucrative for higher-priced vehicles.
3. Tiered Commission Plans
Tiered commission plans reward salespeople based on their sales volume. For example, a salesman might earn a higher percentage if they sell more cars within a month. This structure encourages salespeople to sell more and can lead to higher earnings for top performers.
Factors Affecting Commission Earnings
1. Type of Vehicle
The type of vehicle sold can significantly impact commission earnings. Higher-end or luxury vehicles generally result in higher commissions due to their larger profit margins. In contrast, lower-priced vehicles might yield lower commissions.
2. Dealership Policies
Each dealership has its own commission policies, which can affect how much salespeople earn. Some dealerships offer additional incentives, such as bonuses for meeting sales targets or selling specific models.
3. Location
The dealership’s location can also influence commission earnings. Salespeople in urban areas or regions with higher vehicle prices often earn more compared to those in rural areas with lower vehicle prices.
4. Sales Performance
A salesperson’s performance plays a crucial role in their earnings. Top performers who consistently meet or exceed their sales goals often earn more due to higher sales volumes and additional bonuses.
Typical Earnings for Car Salesmen
1. Base Salary and Commission
Many car salesmen receive a base salary in addition to their commission. This provides a stable income while allowing the potential for extra earnings through commissions. On average, car salesmen earn between $30,000 and $60,000 annually. However, those working at high-end or high-volume dealerships can earn more.
2. High Performers
Top-performing salespeople can earn significantly more. For instance, those in luxury or high-volume dealerships may make $80,000 to $100,000 or more per year, combining base salary, commissions, and bonuses.
Additional Incentives
1. Bonuses
Dealerships often offer bonuses for achieving specific sales targets or selling particular models. These bonuses can add a significant amount to a salesperson’s earnings.
2. Spiffs
“Spiffs” are short-term bonuses or incentives for selling certain vehicles or meeting sales quotas. These additional payments can boost a salesperson’s monthly income.
3. Benefits
Many dealerships offer benefits like health insurance, retirement plans, and paid time off. These benefits add value to the overall compensation package and should be considered alongside the commission earnings.
Conclusion
Understanding how much car salesmen make in commissions involves recognizing various commission structures and factors affecting earnings. While the average earnings range from $30,000 to $60,000 annually, top performers can make significantly more. Knowing how commissions work can help you set realistic expectations if you’re considering a career in car sales or negotiating your compensation.