This article covers some of the most common car salesman commission questions I receive. The first few questions will be questions that non-salespeople ask me, but I’ll finish with questions that I get from fellow salespeople that are looking to improve.
Questions From Non-Salespeople about Car Salesman Commission:
Isn’t it stressful being commission only?
At the start? Yes. Thankfully, if you can find a good dealership, they will often offer you a “guarantee” when you begin. When I started selling cars, the managers provided me (and my two friends that started with me) a $3000 per month guarantee. The idea is that if your commission is less than $3000 at the end of the month, they will still pay the full $3000.
After the first three months, you should have an excellent idea of whether or not you are cut out for this type of work. The car sales business has a shallow barrier to be decent. Becoming a superstar is a bit more work, but beating your guarantee shouldn’t be too hard.
What if you don’t make any money in a month?
In reality, this would likely never happen. Most dealerships now will pay a minimum wage to a salesperson whose commission is less than what they would have made as an hourly employee. That said, this safety net is unlikely ever to be utilized since even in the worst months some people are buying cars.
The fear of not making any money because of a lack of a “guaranteed salary” is overblown, and exasperated by the culture of living paycheck to paycheck. To be successful financially, you need to get to financial safety as soon as possible. That means building up a savings account that you can tap if you do have a bad month.
Commission only car sales is an exercise in risk versus reward. Since you are willing to take the “risk” that you will not make any income, you can take advantage of the outsized “rewards” of this payment plan.
What other careers can you start that enable you to make six figures, with no college degree, your first year? Salary is safe, but it is capped. If your salary is $50k/year, then you cannot possibly make $100k in your first year. If your commission is risky, then the rewards can be huge!
Are there days you don’t make anything?
Tons! During my first few years selling luxury cars, I would make $100k-$160k/year selling 14-18 vehicles per month. If you take into account the fact that half of those cars were sold on Saturday and Sunday, you can begin to understand how much “down time” there is in the car business.
The successful salespeople that move up in their organizations utilize their downtime well. They find a few extra deals and build a few more relationships on the “slow days” when others sit around and talk.
Why wouldn’t you want a base salary? What’s so good about commission only?
Risk versus reward. I see a salary not as a guaranteed income but as a capped income. If my salary is $80k/year with a potential $20k bonus, how is my performance reflected in my income? Under that pay plan, an employee that generates $500k in revenue is paid almost the same as an employee that produces two million dollars in revenue.
I want an uncapped commission only income because it frees me to prove myself and feel like a partner in the business. If I make the business money, I want a cut. That’s it!
Questions Salespeople Ask Me About Car Salesman Commission:
How much do you make per month?
Over the last seven years, I’ve made between $100k and $240k per year selling luxury cars. This is a striking fact to some, and the basis for my opinion on if car sales is a good career.
How much does the average salesperson make?
The average salesperson? That depends on which average salesperson. If you mean the average Audi salesperson in California, then I would say about $75k per year. The highest paid salesperson that I’ve met makes about $450k per year.
Average car salesperson in the United States makes around $40k-$60k per year, according to a quick google search. If you read up on the car salespeople forums, such as reddit.com/askcarsales, you will find plenty of people who make six figures all across the country.
How do you keep track of your car salesman commission?
I maintain a detailed excel sheet that shows every commission, every spiff, my months surveys, and my total backend profit. It’s evolved over the last year to be very comprehensive.
I recommend maintaining the record of your income in an excel sheet so that you can keep track of accounting errors that your dealership makes.
What do you mean “work your pay plan”?
Working your payment plan is the beauty of a commission only job. On your first day, your management team gives you a payment plan that dictates how you can make money at the dealership.
Here is an example pay plan:
Salespeople earn $1000 guarantee per month. They also receive 35% of new car profit, 25% of used car profit, 5% of backend profit, and $100 per survey. If they sell 14 cars, they earn a $500 bonus, and if they sell 20 cars, they earn an additional $1500 bonus. All negative deals on new and used vehicles pay a $300 mini.
That is a fantastic pay plan since there are a few avenues to make money. The average salesperson looks at their pay plan once, and then forgets it, figuring that they will try and sell as many cars as possible.
The smart salesperson looks at their pay plan every month, figuring out how they can squeeze more money out of it. If front end profit is down, they will resort to trying to sell more cars on lease to maximize back end profit. They would always focus on the surveys since they can increase every car’s income by $100 each! They would always try and sell volume, rather than just going for the big commission cars.