Ever wonder why you’re attacked by a swarm of car salesmen when you drive onto a dealer’s lot? Some of it has to do with how a car salesman is paid and how their pay plans work.
When car salesmen work on a commission-only pay plan, the hard and fast rule is – if you don’t sell, you don’t get paid. Only the most dedicated and strong survive and the weak eventually fall to the side.
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There are two major pay plans in the retail car sales world, commission only and fixed/set salary. The professional car salesman on a commission-only pay plan would not have it any other way. They understand depending on how hard and smart they work towards selling cars is a direct reflection of how much commission they will earn.
When a salesman is on a commission-only pay plan their check can fluctuate week by week or month by month depending on several factors, including the salesperson’s attitude, weather, economy, time of year, marketing by the dealership, and other factors. If they’re on a fixed salary they will be paid the same amount no matter what the sales conditions are.
By not having a fixed salary your income limit is endless. The decision is yours to make; do you want a chance to make 6 figures a year or do you want to have a steady stream of income at around $30,000 a year? I know the choice I made.
You Make the Choice
Car salesman pay plans are set by the dealership. They can vary by dealer group or individual dealership. Always read and understand your payment plan before agreeing to the terms and conditions set forth.
Many times a dealer will tie in certain aspects to a car salesman’s pay plan such as customer satisfaction scores, online reviews, etc. What this means is good scores and reviews net you a little bonus while bad scores may negatively hit your pay.
I’m sure the laws vary state-by-state if it’s legal to tie certain goals to a car salesman’s pay plan. However, you have control, if you’re not happy with the commission structure or how it works. Don’t sit around and gripe about it. Go find a dealership that offers more opportunities for your talent.
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This type of pay plan pays you an hourly wage or a certain fixed amount a month. The good thing about this type of pay plan is you have security knowing you’re going to receive a certain amount of money every paycheck.
The bad thing about this pay structure is if you’re really good at selling cars you’re not going to make any more money than what you’ve agreed to. To make matters worse. If you decide to sit back, collect a paycheck, and not produce any car sales. Management will not want to keep paying you and may even begin treating you poorly in an attempt to run you off.
A draw check is normally minimum wage at a 40-hour workweek no matter how long or hard a salesman worked for the week. To entice a car salesman to apply with a dealership they may up the draw to $2,000 or more.
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 a car salesman earns a total of $2,800 for the month and the draw was $1,500. The salesman’s “settle up” commission check, before taxes, would be $1,300.
If the car salesman earns under the draw amount in total commissions, they will not receive a commission check. This will put a car salesman “in the hole” or “in the bucket” with the dealership.
Let’s say the salesman only made $1,200 in total sales and commission; he would start the next sales month in the hole with a $300 draw on the books. This salesman will have to make a minimum of $1,800 before making a commission check and getting out of the hole.
