How do car salesmen make their money

One personal experience I had when having to split a mini was when I worked at my first dealership. The customer had arrived when the salesperson was busy, so I took care of them. They were shopping for a minivan, so I took them through all the options, test drove them in three different vans and answered all their questions which took about an hour and a half.

When they finally decided on one, we went back to my desk to talk about the pricing. Management will not want to keep paying you and may even begin treating you poorly in an attempt to run you off. This means if they do not sell a car, they do not get paid.

Commission-only pay plans are also one of the major factors to such high turnover rates associated with the retail car sales industry. There is no limit to what a car salesman can make on this kind of payment plan.

The more experienced and talented the salesperson is, the more money they can make. If a car salesman does not sell enough cars in a month on a commission-only sales plan to meet the guidelines of the state on minimum wage. This option will not last very long either, commonly just a few months. The dealer is looking for producers that make them money, not cost them money.

A draw check is normally minimum wage at a hour workweek no matter how long or hard a salesman worked for the week. Previous sales commission a car salesman earns from the month before are normally paid around the 15th of the month. The total commission, bonuses and spiff money is calculated and then the draw amount is deducted from that amount. Taxes and any deductions are then deducted from the balance.

If the car salesman earns under the draw amount in total commissions, they will not receive a commission check. Rydeshopper Edmunds MotorTrend. Some dealerships do not make you pay back a draw towards your commission.

Continuous guarantees are very rare but there are dealers out there that work this way. How much a car salesman can make depends on many factors. If a car salesman goes to work every day with the hopes of car sales falling in their lap they will ultimately fail. The salesmen that go to work and apply themselves every day will find selling cars can be a rich and enjoyable career. Based on my experience in the car business and nationwide statistics, the following are income averages based on below, average, and top-performing car salesman.

They may have a poor attitude, be scared to talk to customers, or does not follow directions very well. Retail car sales may not be a correct fit for this individual. They are still trying to figure out if car sales are right for them, and they have not committed themselves fully to this career. This ends up hurting their production more than helping them, and if they do not correct the behavior, they will end up burning out. In my opinion, there are three things that these salespeople all have in common, the gift-of-gab, people-person, and they can absolutely handle objections.

These individuals are usually selling a car or doing something to sell a car while at the dealership with very little downtime. They set appointments, and follow up with their customers; they still rely on walk-in traffic, but not as the first choice of traffic. Yes, you, the customer are still paying for the tire, however the dealer was able to bundle together the parts and the service into one transaction.

The Service department is where car dealerships make most all of their money. Let that sink in for a moment…. How do dealers make money in the Service department then? By beating the book time associated with every vehicle that comes through the service lane. If a certain job should take four hours, and a mechanic can get it done in two, guess what the dealer is going to charge you for? Four hours of work. This is how car dealerships make their money, by processing repairs, maintenance, and more through their service drive efficiently.

MINI is a perfect case study for this. In , the BMW owned brand launched in the United States , and immediately there was a problem for the first few MINI dealers: there were very few opportunities for parts and service sales. The Service department is dependent on vehicles in operation, i. When a new brand launches there are no vehicles in operation, making the entire Service and Parts department nearly obsolete.

At launch, the Parts and Service department can help boost profits a tiny bit by accessorizing cars that the new car department sells, but this is peanuts compared to the revenue they usually bring in.

There are a few nontraditional ways dealers and more appropriately, their owners , can make money. Savvy dealers make money from their dealership by owning the real estate that the dealership sits on.

This is another way dealers can make a lot of money. Many dealers own the land they build their dealerships on, and then the dealership pays them rent each month to operate there. So there you have it, those are the myriad ways car dealerships make money. Call or email me today. If you're looking to buy a new car anytime soon, you're in for a rude awakening Finding a new car for sale right Toyota Tundra prices are going up, up, up. Each model year automakers increase their base MSRP, however this year the Chip shortage?

Magnesium shortage? Labor strikes? If you could wave a magic wand and imagine what Your email address will not be published. Save my name, email, and website in this browser for the next time I comment. Submit Comment. Negotiating tips, money-saving tricks, and car buying advice. These sites show you no-haggle prices from dealers closest to you - and the deals are usually really good. This should be the first step you take when negotiating your car price. Follow this up with my checklist to make sure you squeeze out every last bit of savings.

Each week, I'll keep you up-to-date on the latest car deals and news that might affect your purchase. This includes Signup for The Weekly Newsletter. After being ripped off on his first car purchase, he devoted several years to figuring out the best ways to avoid scams and negotiate the best car deals.