How Much Do Car Salesmen Make? Salary, Commission, Tax Calculator

How much do car salesmen make? Entry level car salesmen can make around $28,000 annually, mid-level car salesmen can take home $35,000 per year and senior salespeople averages $46,000 yearly. Few salesperson can make around $65,000 or more but that’s about 10% of car salesman. Great salesmen can earn even more by selling more. Average gross profit of new car is 400 and used car goes up to 500 per car. More used cars are sold in USA than new car at 2:1 ratio annually. So, used car sellers can get higher paycheck than new car sellers by selling more car. The car salesmen hourly pay is around $20 on average.

Medical, insurance, 401k etc. benefits are also applicable. And the commission depends on performance starts with 20% in most dealerships and franchisee. As a sales person you get to drive the free dealership demonstration cars too.

Use the calculator below to determine car salesmen earnings. Don’t forget to ask for your free loaner car next time you visit the repair shop.

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After completing their high school diploma, two friends embarked on a career in selling cars. They had the same vision; to become the richest, most sought-after salespeople. They had read stories of people making it big in the sales world. What they didn’t envision was the hustle that came before the success.

They went to different states to try their luck. Finally, after five years, they met again, and their lives were completely different. One was rolling in dough and had even opened his dealership, while the other had been living in abject poverty.

Same career, different outcomes! What gives? I will be examining all factors involved in determining how much a salesman takes home at the end of the month.

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Salesmen receive an average of $400 for every car that they sell. A car salesman’s commission is calculated on the sale price of the car. The sale price is negotiated between the customer and the salesman, and based on the car’s MSRP (Manufacturer’s Suggested Retail Price).

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Car salesmen commission is typically 25% on dealership’s profit on the car. An average salesperson sell 10 cars per month. If you do the math, for selling a car for $28940, dealership makes about $1447, considering 5% of the MSRP and sales men make a commission of $361.75 per car. For 10 cars per month, it’s about $3617.50 per month.

Car salesmen earn a percentage of commission based on the amount a car sells for. The more the car sells for, the more a salesperson makes. But the real amount of money salesmen make varies widely depending on their commission structure, the type of vehicles they sell, and the type of dealership (new or used, domestic or foreign).

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Car salesman earnings vary due to different factors; pay plan, Individual attitudes, education, experience, and additional skills relevant to the profession. Car salesman earnings vary due to different factors; pay plan, Individual attitudes, education, experience, and additional skills relevant to the profession. Being a salesman, in general, requires you to work smart to keep vehicle sale going. There are three ways in which car salesmen are paid.

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A salesman earning a fixed salary is paid a specific hourly amount or a monthly wage. This wage is calculated using an average 40 hour week. An average car salesman salary for fixed pay structure is $3352 per month.

Working for a fixed salary means that you do not get to earn extra money by selling more cars. It also means that you get to have a monthly salary whether you make sales or not. However, this does not entertain lazy behavior. Auto sales jobs are very competitive, and you would soon find yourself out if you lack sales skills.

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Some automobile dealers pay their salespeople on commission. This means you get paid a certain percentage of the sale value or the profit made from the sale (usually not the invoice price). This is where the most variations on earnings can be seen. Commission ranges from 25%-40% depending on the number of cars sold.

A successful car salesman selling an average of 10 cars with each car having a gross profit of $ 1600 will take home $4000/month.

Salesmen on commission-based pay plans ought to be very good at making sales. The simple rule of earning commission is; if you do not sell, you earn nothing.

Some auto dealership offers their salesmen a draw against their commission if they have made no sales. This helps them to have some form of income even during low seasons. If you get a draw against commission, the amount will be subtracted from your commission when you finally make sales.

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Some dealerships offers a basic monthly payment at minimum wage as a retainer for salesmen. The minimum wage per month in most states is set at $1000. Aspiring car salesmen will then get a sales commission of 25% on the gross profits for the car they sell or lease.

An average salesman will sell 10-12 cars per month and the dealership gets $1600 in profit per car.

This will earn the sales person a monthly gross salary of:

$1600*25% = $400 commission per car,

So, for 10 cars the commission would be $4,000 and for 12 cars, it would be $4800 in commission only.

And his gross salary will be, Fixed Basic + Commission = $1000 + $4000 = $5,000 for 10 sales. Or, $1000 + $4800 = $5,800 for 12 sales per month.

The average car salesman in the U.S. makes about $ 3349 a month. That works out to about $773 in a week and approximately $19.32 an hour.

Car sales career is a very lucrative. It offers a clear career path for good salesmen. With the right qualifications, you can advance to the sales manager position. Some aspiring car salesmen even make their way to becoming general managers.

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According to federal law, the gross pay is the total amount you get from your employer before any deductions. For example, on average, a sales person from Louisiana gets a Gross Salary of $3349 per month. To calculate the net salary, the following deductions are made.

Net salary = Gross Salary – Deductions

From this example, Net salary= $3349-$650.17 = $2698.83

Most sales staff work from 0900hrs to 1700hrs five days a week. This adds up to 40 hour weeks. Car salesmen who work on commission work for more hours. Overachievers work for even 60-70hrs since some dealerships are usually open seven days a week. The number of hours worked is directly proportional to the number of sales made.

Leave benefits usually depend on the agreement with the employer. According to the U.S. Department of labor laws, companies are not mandated to pay for time off work.

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Calculating the commission earned by a car salesperson can get complicated at times. This is due to the numerous factors contributing to the total commission. Let us delve into the intricacies that characterize car salesmen’s commission.

When the salesman sells a car, he earns a commission based on the profit his employer made. Profit is calculated as:

Gross Profit = Selling Price – Cost Of Car

Before calculating the commission, you have to factor in the ‘pack fee.’ This is a fee set aside to ensure the dealership gets paid despite what price the salesman sells the car at.

If a salesman sells a car and realizes a profit of $2500, set pack fee is $800, and commission is 25%, the commission will be as follows:

($2500-$800) = $1700*25% = $425

Car salesmen’s commission ranges from 20% to 35%. Some employers offer what is referred to as the sliding scale commission. This simply means that you get more commission when you sell or lease more cars. In most dealers, the scale as follows:

At 20% commission per car, for cars averaging $1500 in profit, the commission will be:

$1500*20% = $300 per car.

For 8 cars in a month, the commission will be $300*8 = $2400.

Commission is also taxable. So, if you get fixed salary plus commission both, don’t forget to sum the commission with fixed pay before deducting taxes to get Net salary.

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Spiffs are bonuses availed to salespeople for selling a particular car of a particular model. Mostly, these are cars that have been in the dealership for a long time. A salesman can make $50 to $500 in spiffs for every car they sell.

When a car buyer purchases other services such as insurance and financing, the salesman will earn a back-end commission which is usually 5% of the profit.

In some cases, especially for new car deal, salesmen might sell a car at a breakthrough price. This means that no profit is realized from the sale. The dealer might give the salesman a mini commission. This is a minimum commission and may range from $75 to $200.

When times are hard, and the salesperson may find it difficult to get through. In such a scenario, he might want to request a ‘draw’ against the commission. This is offered at minimum wage and is usually deducted from the commission earned for the month.

Let me now put all the above factors into perspective.

Jeremy Clarkson, a highest paid car salesman working at Top Grand Motors sold 15 cars in July. The dealership had placed spiffs on two cars, at $100 per car. Each car earned the dealership $2000 in profit. The dealership pack policy is set at $800.

A client financed his car through the dealership earning an extra $1500 profit. All back-end commissions are earned at 5% of the profit at Top Grand.
Since sales were low the previous month, Jeremy Clarkson had taken a draw against the commission of $2000.

Considering the dealership uses the below scale for its commission, let’s calculate Jeremy Clarkson’s gross salary for August.

Here,

• Dealership’s profit = $2000*15 = $30000
• Pack = $800*15 = $12000
• Profit-pack = $30000 – $12000 = $18000
• Front end commission = $18000*30% = $5400
• Spiffs $100*2 = $200
• Back end commission $1500*5% = $75
• Total commission $5400 + $200 + $75 = $6975
• Deduct ‘draw’ $6975 – $2000 = $4975

From the above calculation, Jeremy Clarkson will take home a gross salary of $4975 before tax.

Some cars may earn you more commission than others. A new car’s gross profit averages at $1,959, while a used car will give you an average profit of $2,337. You might earn a little more commission on luxury cars, but sales for these cars are few.

Salespeople act on behalf of dealerships to close lease agreements. A lease is a long-term agreement to rent a car. Dealers sell the vehicle to leasing agents, who in turn lease it to you. The client will then pay monthly payments to the leasing agent.

Commission on lease agreements is calculated the same as that of sales. Salesmen will make even more commissions on leased cars as most clients acquire financing and insurance through the dealerships.

James May works for Honda Motors. In August, he closed 3 leasing deals making a total profit of $3500. The company has a pack fee policy of $300 per car leased. The company has a standard commission of 25%. So, the commission that James May made from the lease:

Lease Commission = ($3500-$900)*25% = $650

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Dealerships offer different insurance policies to their employees. 68% of dealership offer accident insurance, 65% offer cancer insurance and 54% offers critical illness insurance. This is according to the Pennsylvania Automobile Association study.

Another benefit you may get as a car salesman is a contribution to a 401k retirement plan. A large percentage of dealers will match the employees’ contribution. That means if you contribute 6% of your salary to the plan, the employee will either match the full amount or half the amount.

From above example, $3349*6% = $200.94. The employer will therefore pay into your plan $200. The main benefit of a 401k is getting the employer to match your contribution and getting a tax reduction lowering your income taxes.

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Everyone should have health insurance as stipulated in the affordable health act. Occupational groups health benefits average $ 1.06 per hour worked. For a salesman working 40 hours a week, the health insurance package will be $1.06*40 = $42.4/week. Monthly health benefits will amount to $170.

99.8% of dealerships offer health insurance coverage for their employees. In addition, 99.6%of the dealerships contribute towards employees’ costs.

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Every individual with an income is eligible to pay taxes. Tax varies depending on the salary level and the start. The federal tax applies to all individuals. It ranges between 10% and 37%. A sales person earning an average of $3349 falls in the 22% bracket.

State income tax is levied on your income by your state. For example, in the state of Louisiana, you will incur a 4% state income tax. Other deductions are social security and Medicare.

For a good car salesperson earning a gross salary of $3349, the net pay will be:

Here, Net salary = Gross salary – Tax and Deductions = $3349 – $650.17 = $2698.83

This calculation is just a sample breakdown. If you wish to know how much you will take home at the end of the month or year, you need to calculate using your salary and state income tax percentages. Use the online calculator for determining what does a car salesman make.

The federal tax also changes depending on whether you are filing as an individual of a married couple. The sample above applies to unmarried people.

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For salespeople looking into car salesman earnings, I’d recommend comparing several other careers before making your mind. Sales and purchasing agents earn a median wage of $66,690. Sales engineers take home $108,830. Public relations specialists will earn $62,810. All these can offer a salesman a clear career path to follow because they require the same skill set. They also have consistent pay and better benefits. Other sales jobs include:

This group of salesmen works at retail stores. They are the first point of contact and provide customers with relevant information about products and services in the store. They also keep inventory and process payments.

Retail store associates earn an average of $11.81 per hour. This adds up to $1890 per month and an average of $22675. This is a lower amount as compared to an average of$ 19.81 earned by car salesmen.

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These salespersons are tasked with creating and maintaining rapport between the customers and the business. They earn an average of $49751 per year.

They work with the sales team in maintaining professional relationships with the customers. They help develop new channels for the business and assist in getting and maintaining sales leads. On average, they make $68,163 per year.

Compared to car salesman salary, some sales careers will earn you less money while others have higher pay.

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Working as a car salesman, your responsibilities are linking between a client and a dealership in the process of buying or leasing a car. You are the first and sometimes the only point of contact to the client.

Being a car salesman you work in dealerships that sell new and used cars. Some dealerships also lease vehicles for different purposes. They meet, greet, assist the customer and help close deals. Some of the duties include:

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Don’t get pumped with the commission rate and good money car salespersons are making. Being a successful car salesperson is no easy task. Car salespeople must deal with customers with a wide variety of needs and wants with regards to their new purchases. Because of this, there isn’t any easy way to tell what it is you need to do to become one the aspiring car salesmen. Here’s how to be a good car salesman.

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You must have college diploma to be considered as a car salesman by most dealerships and franchisees.

A student who would like to become a salesperson should take units such as business, automotive technology, and communication. A bachelor’s degree such as a sales and marketing degree is an added advantage.

Most training is done on the job, new car sales person is trained by experienced ones. For the bigger dealerships, formal training and induction are carried out for new salesmen.

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The most important attribute for a car salesman is excellent communication skills. How you pitch a product to the customer will determine whether they make the deal or not. A salesman who can maintain good conversations with clients ends up making more sales.

Adaptability to changing customer attitudes will ensure that you treat every customer with the utmost respect. Customers’ ideologies, attitudes, and budgets are different. A salesman who can adapt to every one of their customers’ needs creates a good rapport with them. This coverts more sales and more return clients.

A sales person with a good outlook and enthusiasm for everything can make great progress in persuading clients to make a purchase.

You can seldom tell how much a salesperson will earn. Their wages are determined by so many factors. Being a car salesman depends solely on your attitude and ability to make sales. Some salesmen like Ali Reda, the highest-selling salesmen, sold an average of 32 cars a day. Other salespeople will be taking a minimum wage for failing to hit their commission targets.

The answer to how much do car salesmen make is:

• Average annual salary of a good car sales person is $40,000
• Average monthly commission is about $4000
• Average commission per car is about $400
• Average hourly pay is around $20
• Average commission depends on performance but usually 20% or more on employer’s profit

While it’s not a career for the faint of heart, a car salesman career could see you cruising through life and making six figures in only a few years. Be inspired.