Have you ever wondered how a car salesperson's commission is structured? How are they getting paid and how much does that mean they earn? Knowing how much the car salesman is paid can help us understand the thinking behind their sales approach. This, in turn, can help you as you look to buy your car at the dealership (or over the phone or internet, if you choose those routes).
How much does the average car salesperson earn? We posed this question to our car-buying expert, Michael Royce, and here is his response:
Car salesmen are paid on a percentage of the profit of the sale. This percentage varies from dealership to dealership but usually runs in the 20% to 25% range. (Some dealerships use "sales teams." In this method, one salesperson will give you the test drive, do the write-up, etc. and the "team manager" will close the deal. In this case, they share the commission.) So if you buy a new car for, say, $300 over the invoice cost, the salesman may earn only a $50 to $75 commission.
More Insider Tips on Car Buying
In addition to his commission, though, the salesman can earn bonuses that are available from both the dealership and the manufacturer for good sales performance. Usually bonuses - or "spiffs" - are offered to any salesman who sells, say, over 8 cars in a month. "Spiffs" may also be offered for meeting certain profit goals (for example, selling a car for $1,000 over the invoice cost), selling certain profit-making extras (such as paint or fabric protection, alarms, extended warranties, etc.), selling a particularly hard-to-sell vehicle, and so on.
According to a recent national survey, the average commission for car salesmen is $250 per vehicle sold. The average selling price per vehicle is about $1,000 over the invoice cost. And the average number of cars sold is 8 to 10 vehicles per salesman per month.
Read More About Car Buying:
- Car Buyer School
- Car Buyer FAQs
Michael Royce is a consumer advocate and former car salesman. For more car-buying tips and advice, visit his Beat The Car Salesman website.