Anyone who's purchased or leased a car knows this is a major purchase. Prices always seem to be increasing. How about the salesmen (and women) who sell these cars? How well are they compensated?
What Is an Average Salary of a Car Salesman?
According to the site Payscale.com, the median salary of a car salesman in 2018 was $41,539, with a range of about $19,000 for those earning in the bottom 10th percentile and about $83,000 in the 90th percentile. The median is the number above which half earned more than and half earned less than.
Certainly top-earning salesmen earn above this range, but this is a tough, competitive industry.
As an employee of the dealership, car salespeople generally also receive various benefits like health insurance, a 401(k) plan and other normal employee benefits. The benefits, and the cost of those benefits to the employee, will vary from dealership to dealership just as they would among various companies across the employer landscape.
Car Salesman Job Description
The main job of a car salesman is to sell cars. In doing that, there are other aspects and responsibilities of the job to keep in mind, but at the end of the day, the success or failure as a car salesman is judged by the number of cars sold.
In the course of trying to sell cars to customers, car salesmen generally perform a number of tasks and duties including:
- Discussing the features of various models and helping customers decide on the best models for them based on their needs, budget, etc.
- Arranging test-drives for prospective buyers.
- Negotiating the sales or lease price of the car and arranging for any trade-in the customer may have.
- Explaining the various options and trim versions of the models as well as after-purchase features such as service warranties, loaner cars (if on option), repair and service options and other features.
- Preparing the paperwork associated with the sale or lease, including getting the approval of your manager and the finance department.
In today's world of car sales, successful salespeople need to be able to engage with their customers. The old days of the stereotypical car salesmen as a fast-talking individual sometimes wearing loud clothing is gone. Today's car salesmen have to be part salesperson and part consultant. They must be seen by prospective buyers as helpful and not too pushy.
The job description of car salespeople is being impacted by the internet as well. The successful salesmen of the future will be able to engage car shoppers online as well as face-to-face in the showroom. They also need to be prepared for car shoppers who are well-informed and who have generally done a lot of research online before ever setting foot in the dealership.
It should be noted that there are often long hours involved when working as a car salesman. Salespeople at a dealership usually rotate who gets to work with the next prospect on the floor so it can take a number of hours for a salesman just to get to see enough potential buyers to generate a decent amount of sales.
How Do Car Salesmen Get Paid?
Some car salesmen may receive a base salary, but the bulk of their compensation comes from commission based on the number of vehicles they sell over a given period of time.
Commissions are often a function of the price of the vehicle sold and the profit margin of the dealer on the sale of that vehicle. A car salesperson might make 25% of the dealer's gross profit on the sale of the vehicle. Additionally, they may be incentivized to sell high margin add-ons like extended warrantees and other extras that can add to their income on a per-car basis.
Manufacturers may offer certain incentives to dealers to sell certain models. Likewise, the dealerships themselves may offer higher compensation to entice their salespeople to sell certain models or to push certain features to customers.
Dealerships Affect How Much Car Salesmen Make
The amount that a car salesman makes is impacted by a number of factors that are tied to the dealership they work for.
If the dealership sells higher-priced luxury vehicles, this may result in higher commissions per sale for the salesman. However, it may be more difficult to sell a high volume of these vehicles due to the price.
There is no uniform percentage of the sale or the dealership profit that automatically goes to the salesman, so how the dealership sets the salesmen's commission structure will have a big impact on how much the salesmen at that dealership make.
Dealerships may set incentives for sales of certain vehicles, particular options or extras or for selling the most vehicles within a certain timeframe. Achieving any of these incentives can add additional compensation for the salesman.
Job Growth Trends
The Bureau of Labor Statistics indicates that from May 2018 through May 2019, overall employment at retail automobile dealerships grew about 1%. This includes positions beyond salespeople. The BLS says overall growth in retail sales is anticipated to be 2% annually through 2026.
The automobile dealership business is undergoing a number of changes in the way vehicles are sold, and in the way potential customers shop for their vehicles. The main driver of these changes is the internet and technology. This is in many ways reflective of changes by which many types of retail businesses are seeing and being impacted.
Automobile dealerships have and will continue to hire internet sales specialists to engage with potential customers who make inquires via the dealership's website. In today's world, it is easy for car buyers to shop online, compare prices of the same vehicle plus any features offered by a particular dealership.
While it may seem that the future of selling vehicles is just about dealerships posting their prices online and waiting for buyers to show up, the automobile business is and will likely remain a very competitive one. Top salespeople will still be needed to help guide buyers through the car-buying process. Instead of the hard-sell of prior years, the successful car salespeople of today need to take a bit more of a consultative approach to working with their customers.