How Much Do Car Salesmen Make? (Base Salary and Commission)

A rookie car salesman can earn an average of $25,000 a year. However, if a car salesman has been in the industry for more than 10 years, he can expect to earn over $60,000 a year. The most experienced car salesmen in the U.S. can make at least $100,000 a year if they are working at a large dealership. Car salesmen who earn that much typically have been selling cars for at least a decade. Some car salesmen get a fixed salary, while some car salesmen are paid on a commission basis. The salary of a car salesman depends on several factors like experience level, number of cars sold, and customer handling. A car salesman should know all about the car’s features, price and even the history of the company.

The car salesman job is not as easy as it seems. It requires a lot of skills and dedication, and you have to be on the top of your game to make a sale. Car salesmen are the face of the car dealerships and they play an important role in the sales department.

In this guide, I will be covering a detailed answer to the most wanted query i.e. how much do car salesmen make? So, stick with this guide till the end as I’ve covered everything you need to know about the salary and commissions of car salesmen and how much they make per hour.

What Does a Car Salesman Do?

A car salesman’s job is to convince people to buy cars from the car dealership. Salesmen are often the first point of contact for potential customers and can be found at car dealerships. The car salesman has to be able to read people and know what kind of car would work best for them. They have to know what people are looking for, and how to convince them that their car will be perfect for them.

A car salesman also has to know all the ins and outs of the car industry so he can let the customer find out if a car is worth buying. A car salesman has to have great communication skills. He needs to be able to sell his clients on the idea of buying a certain car. A car salesman may be able to arrange test drives, view cars, and provide general advice on car buying.

In addition to selling cars, the salesperson is also responsible for arranging the details of the sale such as the financing, the insurance and any other services which are required.

Here is a breakdown of the skills a car salesman should possess:

• Product knowledge
• Knowledge of the sales process
• Knowledge of dealership policies and processes
• Communicating effectively with just about anyone

How Do Car Salesmen Get Paid?

Car salesmen get paid in the following ways:

• Fixed or based salary
• Commission based on the car sales
• Base salary plus commission
• Incentive-based plans
• Spiffs
• Customer service index (CSI)
• Back end bonuses

Fixed or Base Salary

In the United States, there are no fixed salaries for most professions. Most jobs are paid on an hourly basis. Salaries vary based on experience, location and the number of hours worked per week. The average salary for salespeople in a typical dealership in the US is $28,000 per year. So, if a beginner car salesman works 40 hours a week, his hourly salary would be around $15 per hour. 

The base salary of a car salesman depends a little bit on what brand he is with and what region he works in. For instance, the salary of a car salesman in Los Angeles may be lower than the salary of a car salesman in New York. The difference between the two locations is due to the fact that the cost of living standards in LA is lower than that in New York. Similarly, a car salesman will earn more at a dealership in San Francisco than the car salesman at a dealership in Phoenix.

Apart from the work ethic and dedication towards the role, the base salary of a car salesman also depends on the dealership. The pay plan at the car dealership is important because it affects how much money can be earned.

Working for a fixed salary means that you are able to earn your income no matter how many cars you sell. This also means that you do not have to make money by selling extra cars on top of your base salary. However, this does not promote lazy behavior.  Auto sales jobs are incredibly competitive. There is a lot of competition among new car dealers in the auto sales business, and you will find yourself out of the market if you don’t learn how to sell.

Moreover, a car salesman on a fixed salary is more like a “Product Advisor” and “Customer Service Advocate” than a salesman. When a car salesman gets to know that he is getting paid irrespective of the number of cars he sells to the customers, he cares more about courting buyers and maintaining the (virtual) Rolodex of customers.

Commission Based on the Car Sales

In this type of pay plan, a car salesman is paid on a commission basis. The salesperson earns a percentage of the profit of the car. In other words, the more cars a car salesman sells, the more money he earns.

A car salesman’s commission-based salary varies depending on the type of car they are selling. The most common commission rates range from 20-40% of the net profit on the vehicle’s sale.

For example, you have sold a car worth $45000. The net profit on that car is around 7 percent i.e. $3150. If the dealer has specified a 20 percent commission on that car, you will get a commission of $787.

The commission of a car salesman also depends on the dealership. Each dealership sells different categories of vehicles. If a dealership possesses luxury vehicles like Audi, Ferrari, or Jaguar, you will get more commission. However, their job requirements will be stricter as they would need an experienced car salesman with a strong work ethic. From commissions, the average car salesman earns about $43,000 per year, but that amount varies widely, from about $19,000 to $128,000 per year.

In addition to basic salaries or hourly wages, auto dealerships often provide incentives to boost their salespeople’s earnings. Most dealerships offer bonuses for reaching monthly sales goals or selling a certain number of cars within a month. Some dealerships offer bonuses based on year-end sales goals as well. The bonus of a car salesman ranges from $1000-to $5000 for 10 to 20 units, depending on the dealership.

One point I would like to highlight is that in some dealerships, the commission per sold car depends on how many cars a car salesman sells per month. For instance, I found a comment by a car salesman in a subreddit in which he described the commission structure of a car salesman at a certain dealership in the USA as:

• $150 for selling 1 to 5 cars
• $250 for selling 6 to 9 cars
• $500 bonus on 10th car
• $300 for selling 11 to 15 cars
• $1000 bonus on selling 15th car
• $350 for selling 16 20 cars
• $1000 on 20th car

On the other hand, I found another comment by a person working as a car salesman in a medium-sized dealership. In that dealership, there is a flat rate between $200 and $300 commission per vehicle, regardless of the vehicle’s price, or 30% on the gross profit of a sold vehicle. That person was living in Canada. So, there might be a different commission structure there. 

Lastly, if a car salesman is unable to sell enough cars in a month on a commission-only pay plan, “draw” is sometimes provided to him to cover expenses during slow periods. When a car salesman starts selling cars and earning commissions, the draw is then deducted from the earnings.

Base Salary Plus Commission

The fixed salary plus commission structure of a car salesman is the most common compensation model for salespeople in the automotive industry. With this structure, the employee is guaranteed a monthly base salary, plus a bonus that is typically based on performance metrics. The majority of their compensation comes from their commissions, but the exact percentage can vary based on the agreement between the salesman and his employer.

The fixed salary of a car salesman is typically the same each month. It is either paid on a weekly or monthly basis. The fixed salary of a car salesman is from $1000 to $2000.

In some dealerships, the fixed salary of a car salesman is decided based on the average number of cars he has sold in a certain number of months. The rest of the income of a car salesman depends on how much commission he makes by selling cars.

The commission of a car salesman depends on the dealership. Let’s say a car salesman gets a 20% commission on each car sale, and he sells an average of 20 cars per month. If the average commission of a car salesman is $200 per car, he will earn around $4000 per month from his commissions. So, if a fixed salary of a car salesman is $1200, his total earnings will be:

Total earning of a car salesman = Fixed Monthly Salary + Monthly Commission

= $1200 + $4000 = $5200

Incentive-based Plans

Car salesmen make even more money when they sell extras such as paint sealant, fabric protectant, and extended warranties. For a paint product, a car salesman can earn a commission of up to $100. 

Spiffs

A car salesman can earn $50 to $100 spiff per car. Spiffs is the money car salesman get from the auto dealership for selling a certain type of car, like one that’s been sitting on the lot too long. The spiff system is a way to entice buyers to choose a certain vehicle over another one. 

The spiff system is considered a great incentive to get customers to buy cars but it has also been criticized as being unethical since it encourages the sale of products that are not necessary.

Car dealerships only make money when they sell cars. They have to pay for rent on their building, inventory, employee salaries, etc., so if they don’t make a sale, they lose money. That’s why, to cover up inventory costs, car dealerships also pay money to car salesmen for selling cars that are covering the space.

Customer Service Index

A car salesman is paid $100 to $300 if his customer survey rating (CSI) is above the district average. The customer service index is one of the most important factors in determining if customers will come back to buy from you again and recommend you to their friends. Simply, it’s your customer’s rating of the quality of your service, as measured by their responses to questions such as “Overall, how satisfied are you with our dealership?” or “How likely are you to recommend us to a friend?” The following factors define the CSI of a car salesman:

• Honesty
• Speed of response
• Friendliness
• Knowledge about the product
• Resolving customer complaints

Overall satisfaction with the customer service provided by the car salesman is the average of the above factors.

Back End Bonuses

A car salesman can earn from 5 to 10 percent of the back-end gross profit. The term “back end” refers to any payment that is made after the sale is completed. It may include additional commission based on the dealership’s profits from the sale in terms of loan, tire & wheel package, service plans, and aftermarket warranties.

How Much Commission Does a Car Salesman Make?

It depends on the commission structure at the dealership, but it’s usually calculated based on volume. For example:

• A salesperson who sells one to seven cars per month can earn around 25% of the gross on each vehicle.
• A salesperson who sells eight to 10 cars per month earns 30% commission per car.
• From 11 to 14 cars per month, the commission earned is 35%.
• For 15 cars and over, the car salesman commission rate is 40% per car.

There is one more expense that is deducted from the gross profit dealership gets after selling the car. Pack fee is a way for car dealerships to charge customers for doing paperwork.

A Pack fee typically covers pre-delivery services performed on a vehicle before it is sold. These services usually consist of cleaning the car, filling up the gas tank, and washing the windows. The “other” fees that are included in the pack are documentation fees (doc fee), advertising fees, and dealer preparation fees. The pack fee is usually around $800.

So, the net commission of a car salesman will be the percentage of the amount resulting from the gross profit minus the pack fee.

Car Salesman Salary Calculator

Car Salesman Skills Requirements

Car salesmen are responsible for providing the best deal possible to their clients and can make or break a business if they do not possess the skills necessary to succeed in the industry.

So, here are the skills requirements of a car salesman.

• Car salesmen need to be well-educated on the subject matter they will be dealing with. They must be able to communicate effectively with their clients while being able to negotiate a price that both parties can agree on.
• Car salesmen should be able to present themselves as well as the product they are selling if they want to succeed in car sales. When meeting potential customers, car salesmen should be dressed for success and speak in a professional manner at all times.
• Car salesmen are required to have good people skills to maintain good relationships with their clients. They are required to have excellent communication skills, customer service, and negotiation skills. 
• Car salesmen must be very knowledgeable about the products they are selling. They should be able to make accurate estimates and know the difference between a used car and a new one. They should also be able to answer any questions that customers might have regarding the product they are buying.
• Car salesmen should be known enough about financing, insurance and other related areas to have an intelligent conversation about them with customers.
• Car salesmen should stay up-to-date on changes in the law that affect the sale of vehicles.
• The biggest mistake most car salesmen make is not listening to their customers’ needs or wants when it comes time to purchase an automobile. You must become an expert listener if you want to sell cars successfully over the long haul.
• If car salesmen are dealing with a difficult customer, they should first ask him why he is considering buying that particular vehicle. They should listen to his answer carefully. They should then find out whether he wants to buy the car because it is a good investment or because he has been advised by friends to buy a particular car.
• Car salesman has to be well-trained in order to handle all customers with ease and patience.

How Stressful Is Being a Car Salesman?

Car sales is a very demanding job and it can be highly stressful. The hours are long, the competition is fierce, the commissions are slim, and the customers can be very demanding (and oftentimes downright rude).

Being a car salesman is difficult. The pay can be good, but it is by no means a stable job. Salesman constantly has to sell cars not just to make money, but to stay employed. Salesmen depend on bonuses and commissions for their main income.

Another reason why selling cars is so stressful is because you are dealing with people every day. You are trying to convince them that they need to buy your product, and you have to make sure that you do not offend them or make them feel bad about their decision. If you do not treat them well, then they will not come back to your store again. This means that you must always give great service and try your best to make them happy with the purchase.

How Much Do Car Salesmen Make FAQs