In today’s world, financial stability is a major concern for most individuals and families. Beyond basic needs like health and family, money often tops the list of priorities. Drawing from Maslow’s Hierarchy of Needs, once our fundamental physiological needs (food, shelter) are secured, we naturally progress to safety needs, which prominently include financial security and employment. This reality makes understanding income potential in various professions crucial. For those considering a career in the automotive industry, a fundamental question arises: how much do car salesmen make?
The truth is, car salesman earnings are far from fixed. Throughout my years managing sales teams, I’ve witnessed a wide spectrum of incomes. Some salespeople have significantly out-earned me, reaching into multiple six-figure incomes, while others have struggled to make ends meet.
The car sales profession operates on a performance-based model. Simply put, your income directly reflects your effort and skills. Let’s delve into the specifics of how much car salesmen can earn.
Effort and Skill: The Cornerstones of a Car Salesman’s Income
A car salesman’s earning potential is intrinsically linked to their dedication and proficiency. Newcomers to the car industry often start with a salary-based pay structure, typically for an initial period of around 90 days. These plans offer a guaranteed monthly income, potentially around $3,000, during the initial learning curve. However, after this introductory phase, the compensation model for car salespeople usually transitions to commission-based pay. Interestingly, a growing trend in dealerships is the adoption of hybrid compensation models. These combine a base salary with commission, aiming to attract college graduates and broaden the talent pool in automotive retail.
The level of effort a salesperson invests in honing their skills is a direct determinant of their income. This skill development can occur through dealership-provided training programs or through active practice and customer interaction. Think of sales professionals as athletes – continuous practice is essential for improvement. There’s a common saying: “Amateurs practice until they get it right; professionals practice so they never get it wrong.” Top-performing car salespeople consistently practice and refine their techniques to ensure they consistently deliver exceptional customer experiences and sales results.
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The Lower End of the Spectrum: Income for Unmotivated Car Salesmen
Car salespeople who neglect skill development or lack proactivity in seeking out customers often find themselves at the lower end of the income scale. Unfortunately, a significant portion of car salespeople today fall into this category, passively waiting for customers instead of actively engaging and prospecting. These individuals may earn in the range of $2,000 to $3,000 per month. While labeling them as “bad” might be harsh, “unmotivated” accurately describes their approach. Consequently, their annual earnings typically remain modest, often struggling to exceed $40,000, making the prospect of a six-figure income a distant dream.
The Average Car Salesman Salary: A Comfortable Middle Ground
An average car salesman, defined as someone selling approximately 8 vehicles per month, can expect to earn between $3,000 and $4,000 monthly. Salespeople who perform above average, selling 10 to 12 cars monthly, typically see their income rise to the $4,000 to $6,000 range per month. While selling 8 to 12 cars a month won’t lead to extreme wealth, it provides a stable and dependable income. Furthermore, the transition from an “above average” performer to a “superstar” salesman can unlock a substantial increase in earnings, often pushing them well into the six-figure bracket.
Reaching the Top: The Income of High-Performing Car Salesmen
The elite tier of car salespeople, the top producers who are relatively few in number, demonstrate the remarkable income potential in this field. These individuals, consistently selling between 25 and 50 cars per month, frequently earn between $150,000 to upwards of $500,000 or even more annually. As the saying goes, “that’s not pocket change, that’s serious money.”
Importantly, achieving this level of income doesn’t require a college degree. The key lies in dedicated skill development (explore career opportunities), embracing continuous learning, leveraging social media for personal branding, and consistently practicing and refining sales techniques. The “correct” effort also involves nurturing relationships with your existing customer base, always prioritizing their needs and perspectives.
The most successful car salespeople understand that building genuine human connections is paramount. Establishing and maintaining trust-based relationships is crucial for long-term success. While many newer salespeople focus solely on the immediate next sale, top earners prioritize cultivating lasting relationships and securing referrals from satisfied customers. This relationship-centric approach is a proven path to exceeding six-figure earnings in car sales.
In conclusion, the income range for car salespeople is incredibly broad, spanning from modest earnings to surprisingly high figures. This income variability is a defining characteristic of the car sales profession, making it both challenging and potentially highly rewarding.
Understanding Car Salesman Pay Plans: How Commissions Work
Throughout my extensive career of over 42 years in the retail car industry, I’ve encountered a wide array of salesperson compensation plans. Despite their variations, these plans share a common objective: to maintain total salesperson compensation within the industry standard of 18% to 22% of departmental expenses (more details can be found here).
The vast majority of compensation plans (around 98%) adhere to these industry benchmarks. Whether a salesperson earns 35% or 15% of the gross profit on a sale, various built-in factors ensure that overall compensation remains within the 18% to 22% range.
One common mechanism for managing commission payouts is the “pack.” Pack is a predetermined dollar amount subtracted from a deal’s gross profit before commission calculation. This “pack” is designed to cover dealership overhead costs such as advertising, inventory management software, utilities, and salaries for non-revenue-generating staff like administrative and accounting personnel.
Dealerships with higher operating expenses typically implement a larger “pack.” For instance, a dealership offering a 35% commission rate might have a $1,500 pack. This means $1,500 is deducted from the gross profit of each sale before the salesperson’s commission is calculated. Conversely, a dealership with a 20% commission rate might utilize a smaller pack, perhaps $500. Regardless of the specific percentages and pack amounts, the end result is usually consistent: salesperson compensation aligns with the industry’s 18% to 22% benchmark.
Interestingly, after factoring in all commission components – percentage of gross profit, unit bonuses, manufacturer incentives for specific models or goal achievements – the average commission per car sale often settles between $400 and $500. This consistent average has been observed over many years in the industry.
Luxury Car Sales: Does it Mean Higher Income for Salesmen?
An important aspect to consider is the potential for higher earnings in luxury car dealerships. Luxury brands generally offer slightly higher commission rates compared to volume brands like Chevrolet, Toyota, or Honda. This is primarily due to the higher gross profit margins typically associated with luxury vehicles.
Reflecting on my experience managing a Pontiac dealership (a brand from the past) in the mid-1990s, I recall two salesmen who earned over $150,000 annually selling Pontiacs, exceeding my own income as their Sales Manager! I’ve also worked with salespeople representing high-end luxury brands like BMW and Porsche who consistently earned between $400,000 and $500,000 per year. These top luxury car salesmen sometimes even hired their own independent contractors (1099 staff) to assist with customer follow-up and relationship management, highlighting the scale of their operations and client base.
For individuals aiming for six-figure incomes in car sales, pursuing opportunities at luxury dealerships can be advantageous. However, it’s important to acknowledge that entry into luxury dealerships may be more competitive, with stricter hiring standards.
Ultimately, as demonstrated, the retail automotive industry offers substantial income potential. Whether selling volume or luxury brands, a career in car sales can be financially rewarding for those who are dedicated, skilled, and customer-focused.
