The short answer is that most car salespeople don’t earn a whole hell of a lot of money. Dealership salespeople 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.
However, that’s not the whole story. There’s a vast discrepancy between great salespeople (who sell 20+ cars a month) and bad salespeople (who might struggle to sell 8 cars in a month). A salesperson who moves 20 cars a month is probably going to earn $6-$8k, while a salesperson who can only move 8 cars a month is likely to earn minimum wage.
There’s also the fact that the $330 per car average includes both new and used vehicle sales. New vehicle sales rarely pay $300+ commissions, while used cars can sometimes pay $1,000 commissions.
To sum up, I’d guess the average is close to $250 a car.
If you want to learn more, here’s how commission structures are setup at your average volume brand dealership:*
1. Almost all dealerships set a minimum commission amount, which is the least amount of money you can earn when selling a car. It can range from $75 to $200, depending on the dealership.
A car sale that results in the minimum commission is called a “mini” in the car business, and salespeople hate minis. For the most part, new vehicle sales are all minis. Unless you’re selling a hot model for sticker, you’re not likely to make more than $75 to $150 when you sell a new car.
2. Most dealers pay their salespeople a 25% commission rate, which is based on gross profit minus a “pack” fee. Pack is usually a few hundred dollars ($800) but can also be a percentage.
Example: You sell a used car for $3000 over cost. The commission rate is 25% after pack, and pack is $800.
$3000 gross profit – $800 Pack * 25% = $550 commission
According to the NADA, the average used car gross profit as of May 2013 was about $2400. However, this figure likely includes profits that salespeople never see…in addition to pack, most dealers charge ‘management fees’ and ‘inspection fees’ to their own inventory. That way they reduce commissions for salespeople and management even further.
I’d guess used car commissions industry-wide average about $300 per car.
3. Salespeople have a relatively low quota (8-12 units per month, depending on store and market). Salespeople who fall below the quota are hard to keep around, partially because they usually suck, and partially because they’re negative people who don’t make good money and consequently drag everyone’s energy down.
If you’re at quota, you get to keep your job. If you don’t, you’re at risk of being fired.
4. Salespeople who exceed their quota 20% or more often see an increase in their base commission rate.
If, for example, your quota is 8 cars and you sell 11, you may see all your commissions for the month increased from 25% to 30%. If you sell 15, you may see your commission go from 30% to 35%.
One thought on “Tesla surpasses BMW to become the 4th most valuable car company in the world”
This is very interesting about commissions. I guess I never really thought about how car commissions are made and what the percentage is.
Regardless, I must say that Tesla is a great company and I am glad they are ahead of BMW!