Do Used Car Salesmen Make More than New Car Salesmen?

In my years working at various new car dealerships in Ontario, Canada, my role was primarily in general support of the service departments,including tasks such as dealer trades, shuttle driving, and concierge gave me an outsider's view of the daily operations, and while I never had a direct insight into the sales operations, I pieced together a lot from my interactions with the sales teams and the dealership's financial reports when I could glance at them from a distance.

Perceptions and Preferences in Sales

From what I observed, most salesmen and women had a preference for selling used cars over new cars. This preference stemmed from the higher commission structures typically associated with used car sales. Unlike new car sales, which are mostly revenue-based, used car sales typically come with higher commissions, compensating the salesperson for the extra time and effort required to bring in a used car sale and negotiate with potential buyers.

The Importance of Resale Departments

During peak times, such as quarter and year-end, there would be a mad scramble among the sales team to meet the targets. This is where the resale department came into play, often becoming the most profitable segment of the dealership. Resales, parts, and services were almost always at the top of the profit chain, with new car sales coming in after.

Interestingly, during the best economic times, used car sales managers often earned close to or even surpassing the best new car salespeople. In some cases, the best used car sales managers would earn over $200,000 a year, matching or even outperforming the earnings of the top new car salesmen. Some individuals would be earning a clear after-tax $15,000 each month, burning out every three months and escaping to places like Cuba for a much-needed recharge. However, it's worth noting that these individuals were often spending their money faster than they could earn it, which often led to stress and behavioral issues such as excessive alcohol consumption and reckless driving.

Correlation Between Department Profits and Sales Performance

A successful dealership thrives on a combination of new car sales and an excellent service department. New cars bring in customers who then often end up supporting the used car department. In an ideal scenario, any buyer who cannot afford a new car payment will invest in a used car, which, after some servicing and auction purchases, can be resold for a profit. This creates a healthy cycle that benefits the entire dealership.

Conclusion

While there are debates about whether used car salesmen earn more than new car salesmen, it is clear that the used car sales department can be a significant profit center for dealerships. This does not diminish the importance of new car sales, which bring in a steady stream of customers and drive the entire dealership's sales and service operations.

Diversifying sales strategies and focusing on both new and used car sales can help ensure long-term success for any dealership, fostering a healthy and profitable environment for all employees and stakeholders.