The Truth About Car Salesman Commissions: Insights Experiences
Understanding the Commission Structure
The commission structure for car salesmen is often misunderstood, with many wondering how much kickback they actually receive. Most car salesmen work on a commission basis, earning a percentage of the dealership's profit on each vehicle sold. This commission, typically ranging from 20 to 30%, is a standard part of the job for many sales professionals in the automobile industry.
However, the exact amount can vary. Some dealerships offer a flat fee per car sold, which can range from a few hundred to over a thousand dollars, depending on the vehicle's price and dealership policies. This flat fee model is becoming more common in an effort to ensure consistent earnings for sales staff, regardless of the vehicle's profitability.
Bonuses and Incentives
In addition to their base commission, salespeople can earn additional bonuses based on their overall performance. These bonuses might include meeting monthly sales targets, selling specific models, or achieving high customer satisfaction scores. For instance, some dealerships offer performance-based bonuses, such as stair-stepped commissions based on volume or set commissions per unit with additional bonuses for more profitable vehicles.
Manufacturers also provide incentives to dealerships for selling certain vehicles, and these incentives can be passed on to salespeople. These bonuses, known as 'spins' or 'refunds,' can range from $50 to over $1,000 per car, depending on the volume of sales. For example, a dealership might receive $50 per car for selling 6 to 10 units, increasing to $75 for 10 to 14 units, and $100 for 14 or more units.
Variability in Earnings
The actual earnings of a car salesman can vary significantly based on several factors. These include the dealership's location, market demand, and the salesperson's skill in negotiating deals.
For instance, it's common for commissions to be around 15 to 30% of the front-end gross profit, not the entire profit of the car. This means that the commission is based on the dealership's profits, not the manufacturer's invoice price. Additionally, there might be a minimum commission per unit, often between $500 and $1,500, to ensure that salespeople are motivated to sell less desirable or older inventory.
Sales managers often make it difficult for top salespeople to earn significant amounts. They might implement confusing bonus structures or make it hard to achieve certain performance metrics. However, the top salespeople who can navigate these challenges can indeed earn a substantial income.
Real-World Experiences
From my experience as a car salesman, the commission system can be quite complex and varied. Generally, the commission is about 20% of the profit after the dealer takes the first $500-$1,500 or a flat fee of $75-$300 per car. Manufacturers often provide separate bonuses, known as 'spins' or 'refunds,' which can range from $50 to $1,000 per car, depending on volume. These bonuses are often tied to survey scores, making it possible to lose them if customer satisfaction ratings drop.
For example, a manufacturer might pay $50 per car for 6 to 10 units, $75 for 10 to 14 units, and $100 for 14 or more units. However, these bonuses can be lost for a few months if the dealership's survey scores are not high enough. Even if customers provide excellent feedback, a few lower scores can significantly impact the bonuses received.
Despite the complexity, salesmen try to count each sale as a minimum and hope for more income when bonuses are available. The earnings can be quite variable, depending on the dealership's policies and market conditions.
Overall, while a car salesman can earn a decent income from commissions and bonuses, the exact amount of kickback can vary significantly depending on these factors.