You are using an older browser version. Please use a supported version for the best MSN experience.

Car Salesman Confidential: How Much Do We Really Make?

Motor Trend logo Motor Trend 9/13/2014 Mark McDonald

A while back, a reader suggested I lay out the details of two or three car deals in a row, just to give everyone an idea of how much a car dealership actually makes. I'll do you one better. I'll lay out an entire month for you, so you can see for yourself what the dealership made and what I made.

Research

Before I go further, let me assure you these are real numbers. And I hope I don't disappoint anybody, but I'm not one of those guys making $200,000 a year working 15 hours a week with two full-time assistants setting appointments for me. I'm not that guy. I'm just a regular schmo with tired feet and a big mortgage, working (editor's note: and writing) his butt off to make a living.

I would also like to point out that, this particular month, my dealership put $300 "flats" on every new 2013 model. That means that, no matter what the deal actually made -- or lost -- the salesperson was guaranteed a $300 commission. This was done to motivate us to sell our remaining '13s, to make way for newer models.

The other thing you might notice is that, for the first time in "Car Salesman Confidential" history, I am using actual customer names for added authenticity. So here we go:

CUSTOMER VEHICLE FRONT GROSS BACK GROSS COMMISSION
1. Bashful New '14-1538.410125.00
2. Doc New '14-722.44608.00125.00
3. Dopey Used '1400125.00
4. Grumpy Used '141030.452641.48257.61
5. Happy New '141248.47700.00312.24
6. Sleepy New '14-999.541750.00125.00
7. Sneezy New '13115.951436.54300.00
8. Comet New '13-2269.10300.00
9. Cupid New '13-6292.05420.00300.00
10. Dancer New '13-4548.467.09300.00
11. Dasher New '13-3903.661284.12300.00

OK, I lied. (I'm a car salesman, right?) Those aren't actual customer names. As soon as I found out Motor Trend wouldn't cover my legal fees (editor's note: Not for that, anyway), I changed all the names. But the numbers are real and drawn directly from my paysheet.

As you can see, I sold 11 cars that month -- which is the national average -- and my total commissions added up to $2319.85. However, I was able to "work my pay plan" and hit two "unit bonuses." One was for selling 11 cars, which earned me an additional $250. The other was for selling the most new cars in the dealership, which earned me $500. I missed out on the third bonus -- $1000 for selling 10 new Zorches -- by one unit. Let me tell you, missing out on a thousand bucks by one unit really sucks! So my total earnings, before taxes and deductions, were $3069.85. (Could have been $4069.85 if the Blitzen deal had come through, but the rat bastard bought his wife a Ford instead.)

How much does a car salesman make?

If this turns out to be an average month, then as a car salesman I'll be making about $36,838 this year.

Not too bad . . . but not Bill Gates territory, not by a long shot.

The thing I find most interesting about this chart is the amount of money a dealership is willing to lose on certain sales to make a deal. For instance, when Cupid bought her 2013 convertible, I knew we were losing our hineys . . . but negative $6292? I never guessed it was that much -- and I doubt the customer realized it, either. But it was a 2013 model, so they felt it was worth losing that much to get it off our lot before the '15s arrived.

The second thing I find interesting is how often front-end losses are offset by back-end profits made by the Finance Department. For example, on Doc's deal, we lost $722 on the front end, but made $608 on the back end, almost canceling out the loss. Or, as in the case of Mr. Grumpy's deal, we more than doubled our profit in the Finance office. That's how it should work.

I would also like to point out that one of the couples we made the most money on -- Mr. and Mrs. Happy -- were also the most satisfied customers I had all month. In fact, these folks were so happy they sent me a nice "Thank You" card and bought me a gift certificate to a local restaurant. It's a peculiar fact, but one that every experienced salesperson can attest to: the folks who pay the most are always the happiest, while those who get ridiculous deals are never satisfied -- ever.

I would also like to point out that, without those bonuses, this would have been a lousy month. If you take out the $300 flats on the 2013s and the unit bonuses, I really made money on only three deals. Every other deal was a "mini deal," or minimum commission. Which means, if those bonuses had not been in place, I could have earned only $1694.85.

That's only a little more than minimum wage, folks.

But the broader point is, for the most part, the dealership lost money on the cars I sold. I think if you asked the average customer to create a chart like this for the average salesperson, the numbers under "Front End Gross" and "Back End Gross" would all be in the "plus" category, and every deal would be making thousands of dollars in profit. The reality is far different.

MotorTend Image© Provided by MotorTrend MotorTend Image

"In the Bucket"

Here's something else to think about: I wasn't the top salesman that month. Two other guys outsold me. But one guy in our dealership sold only four cars that month. Yes, that's right: four cars for the entire month. (And he's a good salesman, too.) I don't know what his paycheck was, but let's assume it was worst case scenario -- four mini deals. If that was the case, he made $500 for an entire month's worth of work (close to 200 hours, I'm sure).

Now, if that's not bad enough, consider this. He didn't even make $500, really. He ended up owing the dealership money. Yes, again, that's no misprint. How is that possible, you say?

It's called "the draw." And what that means is, the dealership is required by law to pay you minimum wage just for being there. Normally, this never factors into your paycheck, because the average salesperson's commissions are usually greater than minimum wage. But if your commissions are less than minimum wage, they pay you minimum wage . . . and then deduct what they've paid you from your next paycheck.

This month, my buddy was probably paid around $1400, based on his hours. Subtract the $500 he made in commissions and you've got $900 leftover that he still owes the company. If he makes $2000 in commissions the next month, they'll take back the $900, leaving him with $1100. But let's say he has another lousy month and sells only five or six cars. In that case, he ends up owing the dealership even more -- because, at many dealerships, the draw carries over, month to month.

In most places this is known as "slavery," but in the world of car sales it's called being "in the bucket." And it's a terrible place to be. I've known guys who were $5000 in the bucket. At that point, there's no hope of ever getting out -- unless they make 10 grand in one month, which is unlikely. The next step for a salesperson after the bucket is usually the front door -- quit, and try your hand at something other than car sales.

I realize that some readers will reject what I've written here, and say I'm making it all up. But I'm not. These are the actual numbers from my actual paysheet (except for the dwarves and reindeer -- that was a joke). Dealerships do, in fact, lose money to sell cars all the time. Customers are getting incredible deals, every day -- they just don't realize it.

Thanks for reading and enjoy your next car purchase!

More Car Salesman Confidential:

woman-with-car-salesman1© Provided by MotorTrend woman-with-car-salesman1
AdChoices
AdChoices

More from Motor Trend

Loading...

image beaconimage beaconimage beacon