Money is a primary motivator for most people, ranking high on Maslow’s hierarchy of needs after basic physiological requirements and safety. Securing a stable income is a fundamental goal, prompting many to explore various career paths. This naturally leads to the question: just how much does a car salesman make in a year?
Having spent years in the automotive industry, I’ve witnessed firsthand the diverse income levels of car salespeople. Some have significantly out-earned even seasoned managers, reaching impressive six-figure incomes, while others struggle to make ends meet. In car sales, as in many sales professions, earnings are directly linked to performance.
Let’s delve into the realities of car salesman salaries and explore the factors that determine their earning potential.
A Car Salesman’s Income: Effort and Skill are Key
The income of a car salesman is intrinsically tied to their dedication and sales proficiency. Entry-level car salespeople, still learning the ropes, often begin with a salary-based compensation plan for an initial period, typically around 90 days. These fixed salary plans might offer a guaranteed monthly income, perhaps in the vicinity of $3,000, during these initial months. However, after this introductory phase, the compensation structure for car salespeople generally transitions to a commission-based model. Interestingly, a growing trend in dealerships is the adoption of hybrid compensation plans, blending a base salary with commission incentives. This shift aims to attract individuals with higher education backgrounds to the retail auto industry.
The extent to which a salesperson invests in honing their skills—through available training programs or by actively engaging with customers and refining their sales techniques—directly influences their earning capacity. In this regard, sales professionals share similarities with athletes. Consistent practice is crucial for continuous improvement. There’s a common saying: “Amateurs practice until they get it right; professionals practice so they never get it wrong.” Top-performing car sales professionals understand this principle, constantly practicing and refining their approach to ensure they consistently perform at their best.
(Related Reading: Navigating Car Dealership Scams: What You Need to Know)
The Earnings of an Underperforming Car Salesman
Salespeople who neglect skill development, lack initiative in customer outreach, or passively wait for customers to walk in—a work ethic unfortunately seen among some car salespeople—typically find themselves at the lower end of the income spectrum. These individuals might earn in the range of $2,000 to $3,000 per month. While labeling them as “bad” might be harsh, “unmotivated” is perhaps more fitting. The reality remains that their monthly earnings will likely remain modest, making aspirations of a six-figure annual income exceedingly difficult to achieve. Earning more than $40,000 annually can be a significant challenge for this group.
What is the Average Car Salesman Salary?
An average car salesman, defined here 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 each month, typically see their earnings rise to the $4,000 to $6,000 range per month. While selling 8 to 12 cars monthly won’t lead to extreme wealth, it provides a stable and dependable income. Moreover, the progression from an “above average” salesperson to a top performer can unlock a substantial increase in earnings, often pushing them well into the six-figure income bracket.
The Substantial Income of a Top Car Salesman
Elite performers, a rare but impactful group in car sales, consistently sell between 25 and 50 cars monthly. Their dedication and skill translate into impressive earnings, generally ranging from $150,000 to upwards of $500,000 or even more annually. As the saying goes, this is “heavy duty money.”
Remarkably, this level of income isn’t contingent on a college degree. Success in car sales is achieved by focusing on professional development (refining your skills), embracing continuous learning, leveraging social media to build a personal brand, and diligently practicing and refining sales techniques. Crucially, the “correct” effort involves nurturing relationships with your existing customer base, always prioritizing their needs and perspectives in every interaction.
The most successful individuals in automobile sales understand the foundational importance of establishing a genuine human connection with customers, maintaining this connection over time. Building trust and strong relationships is a process, and it’s easy to lose sight of this in the fast-paced sales environment. Many newer salespeople prioritize the immediate next sale. However, the top earners, those exceeding $500,000 annually, prioritize cultivating lasting relationships and leveraging referrals from satisfied customers. For those aiming for a six-figure income in car sales, relationship-building is a critical pathway to achieve it.
In summary, the earning potential for car salespeople is incredibly broad, ranging from modest incomes to figures that might seem surprisingly high. This income variability is precisely what makes the car sales profession so compelling and dynamic.
Decoding Car Salesman Pay Plans
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 dealership expenses (further details available here).
The vast majority of compensation plans (approximately 98%) adhere to these industry benchmarks. Whether a salesperson earns 35% or 15% of the gross profit from a deal, various embedded factors ensure that overall compensation remains within the 18% to 22% range.
This consistency is achieved through mechanisms built into compensation plans that reduce the commissionable portion of a sale’s gross profit. A common element is the “pack.”
The “pack” is a predetermined dollar amount subtracted from a deal’s gross profit before commission calculation. It’s designed to cover dealership operational costs such as advertising, inventory management software, utilities, and salaries for non-revenue-generating staff, including administrative and accounting personnel.
Dealerships with higher overhead costs typically implement a larger pack.
For example, in a dealership with a 35% salesperson commission rate, the pack might be set at $1,500. This means $1,500 is deducted from the gross profit of each deal before the salesperson’s commission is calculated.
Conversely, a dealership offering a 20% commission rate might have a lower pack, perhaps $500. Ultimately, regardless of these variations, the salesperson’s compensation in both scenarios tends to align with the industry benchmark of 18% to 22% of expenses.
Interestingly, when all components of a salesperson’s commission are factored in—percentage of gross profit, unit bonuses, manufacturer incentives for specific models or sales targets—the average commission per car sale often falls between $400 and $500. While the precise reasons for this consistent average remain somewhat unclear, my 42 years of experience in the car business have consistently shown this to be the typical outcome for most salespeople.
Luxury Car Sales: Higher Commissions?
Another noteworthy aspect is the tendency for luxury car brands to offer slightly higher commission rates. This is primarily attributed to the generally higher gross profits associated with luxury vehicles compared to volume brands like Chevrolet, Toyota, or Honda.
Reflecting on my time managing a Pontiac dealership (a brand from the past) in the mid-1990s, I recall two salespeople who each exceeded $150,000 in annual earnings selling Pontiacs, while my income as their Sales Manager was considerably less. Conversely, I’ve also worked with salespeople representing high-end luxury brands like BMW and Porsche who consistently earned between $400,000 and $500,000 annually. These top luxury car salespeople sometimes even employed their own independent contractors to assist with customer follow-up and relationship management, further enhancing their service and sales volume.
For individuals aspiring to earn a six-figure income in car sales, transitioning to a luxury car dealership could be advantageous. However, it’s important to note that entry into luxury dealerships may be more competitive, with higher hiring standards.
Regardless of the brand segment, the retail automobile industry offers significant earning opportunities for those who are dedicated and skilled.
