To become a car salesman in the United States, typically all you need is a high school diploma. Like any profession, it is important to have an understanding of what kind of salary you can expect. In this article, we will cover the average salary of a car salesperson, how they make their money, what factors may affect their earnings potential, as well as the following FAQs:
Car Salesman Job Description
Before diving into the finances, let’s lay out what the duties of a car salesman are. In a day, a salesperson will typically be showing cars to customers, assisting them with their purchase, and negotiating any sales contracts. Additional duties may include:
Taking stock of the dealership inventory to help customers find the vehicle that best fits their needs
Taking customers out on test drives
Assisting customers with automotive trade-ins
Answering questions about vehicle specifications
Explaining options for warranties and financing
Oversee and negotiate with banks and finance managers for a loan or lease
Prepare paperwork associated with the sale
What is the Average Car Salesman Salary?
A car salesman's salary ranges depending on the individual’s amount of experience, education level, and geographic location. Though as of December 9, 2020, ZipRecruiter claims the national average salary for a car salesperson is $40,935 a year. If we break that down, it works out to be approximately $19.68 an hour. Going even further it comes out to be $787/week or $3,411/month. It’s important to note that these figures reflect a base salary that may be somewhere around the minimum wage.
Factors that Affect a Salesperson’s Wage
As mentioned above, several factors can affect a car salesman’s earnings. Some factors we will discuss are car business operating hours, years of experience, and bonuses.
A sales representative will generally work regular business hours, but since buyers do a lot of shopping on the weekends, it extends working hours to include weekends and most holidays. Working long hours during busy periods or holiday promotional events can help salespeople earn more. A salesman who has more years under their belt or has been working for the same employer for an extended period often receives a higher base salary. On top of that, the salesperson who has more years of experience is also likely to sell more vehicles and earn a higher amount of commission. Lastly, bonuses are an additional way to motivate salespeople to sell more cars and ultimately make more money. Some well-known bonus types are production bonuses, top salesperson bonuses, manufacturer bonuses, and dealership specific bonuses.
A production bonus may be for total cars sold. An example of this would be:
10 cars a month = $250 bonus
15 cars a month = $750 bonus
20 cars a month = $1,000 bonus
25 cars a month = $1,500 bonus
To keep up morale and friendly competition amongst co-workers, some dealers have bonuses for the top salespeople. It may look like:
$350 = Top salesman of the month
$200 = Second place
$100 = Third place
Some manufacturers will pay bonuses ranging from $10 to $200 or more for selling a specific vehicle model. These bonuses are not always available, and a lot of the time the manufacturer requires salespeople to go through training and get certified before qualifying for this type of bonus. Some in-house bonuses that dealers will have will be for selling vehicles they want off the lot ASAP. The dollar amount can start anywhere from $50 or higher.
How Do Car Salesmen Get Paid?
Like we’ve mentioned before, one way of making money as a car salesman is through a set salary. A salesman earning a fixed salary is paid the same amount of hourly wage or amount per month. This type of payment plan gives the individual security of knowing how much they will get every paycheck. The downside to this pay structure is if you’re good at selling cars, you’re still not going to make more than what you initially agreed on.
Now we will introduce a commission-only pay plan. The majority of a salesman’s earnings depend on how many cars they sell, or a commission. The exact percentage of the sale varies by the dealership and can be anywhere from 15 to 40 percent. This pay structure can be risky for someone inexperienced as the commission will fluctuate over weeks or months depending on factors including a salesperson’s attitude, weather, economy, time of year, marketing, etc. For a professional car salesman, this type of pay structure is king. Not having a fixed salary leaves them with no limit on how much they can earn, and their earnings will be a direct reflection of how hard and smart they work towards selling cars.
How a Salesperson’s Commission is Calculated
Depending on the dealership, a salesperson can earn a commission ranging from 15% to 40% of the front end gross profit after “pack”. Pack describes the amount of marketing and overhead costs allocated to a vehicle and is a set amount between $250 and $750 (can be higher) based on the dealer.
Here is an example of how a commission may be calculated if the salesman earns 15%.
$35,000 = Agreed upon vehicle sale price
$33,250 = Dealer invoice + $750 pack
$1,750 = Commissionable front end gross profit
35,000 - 33,250 = 1,750
1,750 * .15 = 262.5
This salesman will earn $262.50 based on a 15% commission of $1,750.
Some dealers may set the front end commission at a flat 15% regardless of how many cars are sold. Other dealers may use a structure that sets minimum commission rates to 15% for the first 5 cars sold, then raise it to 20% for 10 cars sold, 25% for 15 sold, and so on. To sum it up, if we had to put a number to it, the average commission on a car is around $250.
Ways to Earn More Money as a Car Salesman
While working for a car dealership, there are plenty of ways to increase your earnings. These steps include the following:
Consider higher education
Master your sales techniques
Observe your coworkers
Watch the job market
Consider Higher Education
Many successful car salespeople have high school diplomas or their GEDs. However, earning a bachelor’s degree in sales, business, administration, or many other fields could be beneficial for a salesman if they’re interested in increasing their base salary.
Master Your Sales Techniques
Ultimately, your success as a car salesman depends on your ability to effectively educate a customer about options available and make them feel at ease. Using effective sales consultant techniques such as finding out your customer’s needs and showing them a product that will meet that need will help sell more cars. Being prepared for shoppers who are well informed and have done a lot of research before coming to the dealership is also very advantageous.
Observe Your Coworkers
One of the best ways to learn about sales skills is by learning from the experienced salespeople in your workplace. Observe how the most successful salesmen interact with customers and conduct sales. By building relationships with other salespeople, you are likely able to get feedback and some may even be willing to share some tips and tricks.
Watch the Job Market
Base salaries vary from dealership to dealership. Some are more willing to offer higher base salaries, and/or commission percentages. By keeping an eye on job postings, you may be able to find an opportunity to increase your annual income and have a high-paying job. Many dealerships will offer general manager or sales manager positions to individuals who are qualified.
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