If you’re interested in the world of car sales, then you may be wondering, “How much does a car salesman make?” Most car salesmen earn commissions based on the number of cars they sell each month. In this position, your ability to connect with potential customers and close sales directly impacts your earning potential. The automotive industry is a dynamic one, and there are many factors that affect how much a car salesman can earn. These factors include sales skills, car dealerships, and even the specific models being sold. Selling cars requires deep product knowledge, top-notch communication skills, and a knack for closing deals. If you’re interested in becoming a car salesman, you may be wondering how much you can make in this position.
For almost everyone on the planet, the most important thing is money (second only to health, family, etc.), and Maslow’s hierarchy of needs tells us that after our psychological needs are met (food, water, shelter, etc.), we move on to safety needs (personal safety, employment, resources). If you’re hoping to join this industry someday, now’s the time to start paying attention to market trends and developing the essential skills needed for this job.
The Role of Car Salespeople
Every customer hopes that the car salesman can find a car that suits their budget and needs. The car salesman is the first point of contact for customers who come to buy a used or new car, so the salesman’s primary goal is not sales, but to establish a rapport and trust with everyone. Only by establishing a relationship with the buyer can sales occur, which means that how many cars are sold depends largely on the ability to establish relationships. And the number of cars sold will affect the income of the car salesman.
What does a car salesperson do?
Car salespeople typically show cars to customers, promote the benefits of cars, and negotiate sales contracts with buyers every day. What are their other main responsibilities?
Demonstrate vehicle features and benefits
Complete and process car buying or selling documentation
Greet and introduce themselves to potential customers
Consult the dealership inventory to help clients find the best vehicle for their needs
Oversee the signing of sales contracts
Maintain up-to-date knowledge of the dealership’s inventory and various vehicles
Answer questions about vehicle specifications
Negotiate sales discussions between the dealership and customers
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What does a bad car salesman make?
This is the person who sits aimlessly at their desk waiting for clients to come to them, who doesn’t proactively seek out clients, who doesn’t practice or work hard to improve their skills, and the sad reality is that this represents the work ethic of many car salespeople today.
They will typically find themselves at the bottom end of the pay scale, where they may make between $2,000 and $3,000 per month. This is not to say that they are “bad” salespeople, but rather that they are unmotivated salespeople. For this group of salespeople, the aspiration of making six figures or more per year is unlikely to be realized, and they will only make a few thousand dollars per month, and they will be lucky to make more than $40,000 per year.
What does an average car salesman make?
An average salesperson who sells eight cars a month can make $3,000 to $4,000 a month. An exceptional salesperson who sells 10 to 12 cars a month can make $4,000 to $6,000 a month. Of course, selling eight to 12 cars a month certainly won’t make you rich, but it can provide a steady stream of income. Furthermore, the jump from an “exceptional” salesperson to a “superstar” can result in a substantial increase in income that will almost certainly exceed the six-figure threshold.
Does a car salesman make more selling luxury cars?
Most luxury brands tend to have slightly higher commissions. This is an interesting observation simply because luxury brands tend to have higher gross margins compared to larger brands like Chevy, Toyota, and Honda, however, luxury stores can also have a higher barrier to entry (i.e. they don’t hire just anyone).
Regardless, as you can see, there is a lot of money to be made in automotive retail, and if your goal is to make over six figures selling cars, then entering a luxury store might be to your advantage.
How does a car salesperson earn money?
Typically, a car salesperson makes most of their income from commissions. Most car salespeople work at new or used car dealerships. Car salespeople have sales quotas each month that they try to meet. For example, a dealership’s sales quota might be 10 cars per month. If a salesperson is able to exceed their quota, they may receive a bonus or raise on top of their normal commission rate. While they may earn a base salary, a car dealership may calculate their commission based on the profit they make from the sale of the car. Salespeople typically receive a percentage of the revenue from each sale. Selling cars can be a lucrative career if you master sales techniques and continue to learn on the job.
Net Profit and the Dealership’s Role
A dealer’s net profit includes the front-end profit directly from selling the car, as well as the back-end profit from financial and insurance products, service contracts and accessories, the latter of which usually go to the dealer but can sometimes be taken as commissions. It’s important to know that this net profit affects the income of a car salesperson.
Types of pay plans for car salespeople
Every compensation plan has one thing in common – they are structured to keep the salesperson’s total compensation within the 18% to 22% industry benchmark. How so? Simple, every compensation plan has something in it that reduces the portion of the gross profit on a sale that is eligible for commission. So, whether a salesperson makes 35% of the gross profit on a deal or 15%, the compensation never really exceeds the 18% to 22% benchmark because of the other factors involved.
For example, most compensation plans have something called a “package,” which is used to pay for dealer expenses such as advertising, inventory management software, utilities, and non-revenue-generating employees such as administrative and accounting staff. The package is a predetermined dollar amount that will be deducted from the gross profit on a deal before the commission is calculated. The larger the store’s expenses, the larger the package.
Key Skills and Education
This profession values practical skills over academic qualifications, and while having a college degree (e.g., a bachelor’s degree) may provide a competitive advantage, it is not a requirement to become a car salesperson. In fact, some of the most successful car salespeople have no formal education beyond high school, but they have a deep understanding of effective sales techniques and excellent interpersonal skills.
Here are some key skills for car salespeople:
Product knowledge
Confidence
Active listening
Negotiation
Critical thinking
How to earn more money as a car salesperson
Improve your sales skills. Developing your sales skills may help you increase your earning potential. Using effective sales techniques can help you sell more cars to meet or exceed your monthly quota.
Consider higher education. You may choose to increase your base salary by pursuing higher education. A college degree in sales, business, administration, or finance can prepare you for a career in sales.
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Learn from your colleagues. You need to observe how the most successful salespeople interact with customers and close sales. Build relationships with other salespeople and ask them to explain their processes or make suggestions for improvements.
Take advantage of resources. These may include lectures, seminars, books, articles, continuing education courses, or webinars. Spend some time and effort utilizing these resources to improve your sales skills. They may help you gain some insights and learn valuable ways to become a more profitable salesperson.
Pay attention to the job market. You can regularly check job postings for opportunities that may help you increase your income. Often, finding a higher-paying job in the same industry may be a great opportunity for your career advancement.
Conclusion
At the end of the day, the key to making money is selling more cars, continuing to develop and improve your skills, understanding your customers, and getting paid not only for your product but also for what you bring to the team. You don’t have to be an average car salesman making an average salary to get into this business. Work for a good dealership.
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