When it comes to working in the automotive industry, car salesmen (or car salespeople) are often motivated by the potential to earn significant commissions. But what exactly is the average commission a car salesperson makes? How is it structured, and what factors influence the final paycheck? In this detailed article, we’ll cover everything you need to know about car salesman commissions, including industry standards, calculations, and the real earning potential in today’s market.
Whether you’re considering a career in car sales, currently working in the industry, or just curious about the behind-the-scenes of vehicle purchases, this article will provide you with in-depth, data-driven insights.
Understanding the Basics of Car Sales Commissions
Before diving into commission rates and structures, it’s important to understand how car sales commissions work in general.
How Car Sales Commissions Are Calculated
In most dealerships, a car salesman’s commission is calculated based on the profit the dealership makes on a vehicle sale, not necessarily the total price of the car. The calculation can vary depending on the dealer type (franchise vs. independent), location, and performance metrics. However, a common structure might look like this:
- The salesperson earns a set percentage of the dealership’s profit per sale.
- The commission may be tiered or include bonus structures based on monthly sales volume.
- Commission can also be supplemented by selling add-ons such as extended warranties, service plans, and financing through the dealership’s finance office.
Another way salespeople earn more money is through sales bonuses that depend on the manufacturer’s performance incentives or how much they beat their quota.
Average Car Salesman Commission: Industry Standards
While commission rates vary by dealership and location, industry veterans generally agree that the average commission rate for a car salesperson is between 25% and 45% of the dealership’s gross profit on a vehicle sale. However, several additional factors can significantly impact how much a car salesman actually earns.
Dealership Profit Per Sale
To better understand the size of a car salesman’s commission, it’s essential to break down how much a dealership earns from each vehicle sale.
| Car Type | Dealership Gross Profit | Estimated Salesperson Commission |
|---|---|---|
| New Car | $1,500 – $3,500 | $375 – $1,575 (25%–45%) |
| Used Car | $1,000 – $2,500 | $250 – $1,125 (25%–45%) |
| CPO (Certified Pre-Owned | $1,200 – $3,000 | $300 – $1,350 (25%–45%) |
Gross profit can vary dramatically depending on how much over invoice the vehicle sells for and the type of vehicle being sold.
Commission Structure by Vehicle Type
- New Car Sales: Typically pay lower commission rates due to manufacturer control over pricing, but higher profit margins in some cases.
- Used Car Sales: Often offer slightly higher commission rates but lower gross profit.
- CPO Car Sales: Higher margin sales with incentives from both manufacturers and dealerships, making this a lucrative avenue.
Other Sources of Income: Beyond the Vehicle Sale
While base commissions from car sales are a large part of a car salesman’s income, many sales professionals earn additional income by pushing other dealership services.
Finance and Insurance (F&I) Commissions
The real money in car sales is often earned outside of the showroom. Salespeople are incentivized to offer products like:
- Extended warranties
- Vehicle service contracts
- Premium maintenance plans
- Gap insurance packages
Each of these can generate hundreds of dollars in commission per sale. For instance, selling a $1,000 extended warranty might earn a salesperson a fixed commission of $200 to $300, depending on the dealership’s structure.
Differentiating F&I Compensation Models
Some dealerships have set commission dollars per product, such as:
| Product | Estimated Commission |
|---|---|
| Extended Warranty | $150 – $300 |
| Service Contract | $100 – $250 |
| Gap Insurance | $50 – $100 |
Some dealerships also use a tiered bonus system, where salespeople who bundle two or more of these products together can earn significantly more.
Referral Bonuses and Team Commissions
It’s not uncommon for newer salespeople or associates to earn a smaller commission for simply referring a customer to a senior salesperson, or for support roles like handling paperwork or digital communication. In some dealerships, the team-based sales approach offers shared commissions, which can benefit or limit a single salesperson’s earnings depending on team performance.
How Location and Dealership Type Influence Commission Rates
The geographic location and type of dealership influence not only how many cars a salesperson sells but also how much they earn per sale.
Franchise Dealerships vs. Independent Dealerships
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Franchise dealerships (e.g., Toyota or Ford) often regulate pricing tightly. Because of lower gross margins due to manufacturer control, salespeople earn lower base commissions but benefit from manufacturer loyalty bonuses.
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Independent dealerships and used car lots have more flexibility in markups, meaning a higher gross profit can lead to higher commissions, though sales can be more challenging without a brand-backed sales strategy.
Urban vs. Rural Area Commissions
While car sales commissions are largely based on profit per sale, the number of potential customers and competition can also influence income.
| Location Type | Pros | Cons |
|---|---|---|
| Urban | Higher foot traffic, better competition | Lower margins due to competition |
| Rural | Higher margins, fewer competitors | Lower traffic, longer sales cycles |
It’s not necessarily where the dealership is, but how much the salesperson can maximize profit per vehicle and volume.
Top Earners in the Car Sales Industry
While average earners bring home $30,000 to $70,000 per year, the top car salespeople in the country can earn six figures, particularly if they work for high-end luxury dealerships or move substantial inventory.
What Sets High Earners Apart
Top earners don’t just rely on base commission—they utilize every tool in the book.
- Master negotiations to capture more profit per sale
- Build a high volume of repeat and referred business
- Sell F&I products with confidence and persuasion
- Earn manufacturer and dealership performance bonuses
Some dealerships offer monthly or quarterly sales bonuses:
- Reaching 10 sales might earn you $500
- Beating that by 5 units could net $1,000
- Top sellers often get paid thousands just for leading the dealership in sales
According to industry reports, Tesla salespeople often report lower base commissions, since Tesla does not allow traditional haggling and vehicles are sold at set prices. However, Tesla has higher volumes, which can still lead to strong income through sheer scale.
Trends in Car Salesman Compensation
It’s important to note that car sales commissions have evolved over time. Several trends are shaping the modern car sales landscape:
Transparency and Fixed Pricing
Dealerships are increasingly moving toward fixed pricing and online sales platforms, reducing dealer profit per vehicle. While this trend is beneficial for consumers, it can compress commissions for salespeople, particularly in new car sales.
Shift to Digital and Social Media Sales
Many dealerships are now offering commissions to salespeople who close deals online, through chat, or even through social media. This trend rewards versatility and adaptability in reaching buyers through non-traditional methods.
Rise of EV and Hybrid Sales
With the growth of EVs in the market, there are new incentives in place. Manufacturers like Ford, Chevrolet, and Rivian often offer additional bonuses for selling qualifying electric vehicles, and salespeople who specialize in EV sales can benefit from this emerging market.
How to Maximize Car Sales Earnings
For sales professionals in the automotive industry, understanding the entire compensation model is key to maximizing income.
Focus on Profitable Sales, not Just Volume
Selling five $1,500 profit cars might not earn as much as selling two $5,000 profit vehicles.
Master Upselling
The most successful salespeople are not just car sellers—they’re package deal experts. They know how to upsell extended warranties, paint protection, or undercoating—each of which translates to extra commission checks.
Learn Finance and Insurance Products
If a salesperson can confidently present F&I options and offer financial packages from lending partners, they will consistently out-earn peers who just sell the car and move on.
Develop a Referral and Follow-Up Strategy
Building relationships is critical in car sales. A smart salesperson knows that 30% of their income often comes from returning customers and referrals.
Challenges in the Car Sales Industry
It’s not all high-margin deals and generous bonuses in the car industry. Salespeople face several challenges that can affect their income.
- Dealership commission structures often change with little notice.
- Miscommunication about how profits are calculated can lead to disputes over commission payouts.
- There’s growing pressure to keep pricing transparent and fair, resulting in reduced markup opportunities.
Salespeople must also be able to work with tight margins, especially with new car sales during high inflation or economic downturns.
Conclusion: How Much Do Car Salesmen Really Make?
In summary, car salesman commissions are built on a percentage of gross profit from vehicle sales, typically ranging from 25% to 45%. With the average new car profit at $2,000–$3,000, that means a commission per sale ranges from $500 to $1,350. Add to that commissions on service contracts, add-ons, and finance products, and the total commission per transaction can easily surpass $1,500 per car.
Ultimately, success in this industry isn’t handed out—it’s earned through hard work, knowledge, and persistence.
If you’re serious about making the most out of your car sales career, understanding how commissions work, optimizing your sales approach, and making the most out of F&I opportunities is crucial. Dealerships will always need top sellers, and the financial rewards are there for those who put in the effort.
So the next time you’re wondering, “what commission do most car salesmen get?” remember—it’s not just the percentage they get from the sale, but everything they can turn that dealership opportunity into.
What is the typical commission structure for car salesmen?
The typical commission structure for car salesmen can vary depending on the dealership, location, and type of vehicle being sold. On average, car salespeople earn a commission based on a percentage of the profit the dealership makes from a sale. This percentage can range from 20% to 30%, though it’s not uncommon for the commission to be calculated differently depending on whether a car is sold above, at, or below the invoice price.
Dealerships may also offer a tiered system where the commission increases if a salesperson meets or exceeds monthly sales targets. In some cases, flat-rate commissions are given per vehicle sold, typically ranging from $150 to $300 per car. Luxury dealerships often provide higher commissions due to the higher price tags of the vehicles, while used car sales may offer smaller commissions but higher volume opportunities.
How do car salesman commissions differ between new and used vehicles?
Commissions for new and used vehicles generally differ due to the profit margins involved in each sale. New car sales typically yield lower commission percentages, often around 20% to 30% of the dealership’s gross profit, because the vehicles have less room for markup. Additionally, factory rebates and incentives can reduce the profit per sale, which in turn affects a salesperson’s commission.
Used car commissions, on the other hand, can offer more lucrative opportunities for salespeople because dealerships often have greater flexibility in markup. The commission rate is also usually consistent regardless of the vehicle’s cost, meaning that selling a high-value used car can result in more earnings per unit sold. This can motivate car salesmen to focus more on used car sales, especially when new car profits are tightly regulated by manufacturers.
What factors influence how much commission a car salesman earns?
Several factors influence the commission a car salesman earns, starting with the overall profitability of the vehicle sold. This includes the selling price, trade-in value, and how much the dealer paid for the car. Sales volume also plays a critical role, as many dealerships offer bonuses or higher commission rates once a salesperson reaches a certain number of vehicles sold per month.
Other variables include the brand or type of car being sold, with luxury and high-end models often generating larger profits and therefore higher commissions. Customer financing and add-on products such as extended warranties, insurance, or service packages can also add to the gross profit, which in turn increases the salesperson’s commission. Lastly, the specific dealership’s compensation policies, including salary draws or incentives, can also impact earnings.
Do all car salesmen work strictly on commission?
No, not all car salesmen work strictly on commission. While many do operate under a commission-only model, others receive a base salary or a draw against future commissions. These structures can provide more financial stability, especially for newer salespeople still building their customer base and network.
Dealerships may also implement salary-plus-commission schemes, where a base salary is supplemented by performance-based commission. This helps ensure that employees earn a minimum income while still being incentivized to sell more vehicles. In some cases, the draw system is used, where dealerships advance a set amount weekly or monthly that the salesperson must “pay back” through commission earnings.
How much do car salesmen typically earn in a month?
A car salesman’s monthly earnings can vary widely depending on factors like location, dealership type, and individual performance. On average, a full-time salesperson in the U.S. might make between $3,000 and $8,000 a month. This is based on selling 10 to 20 cars, with commissions typically ranging from $150 to $300 per car. Those working in luxury dealerships often earn more per vehicle sold, although volume may be lower.
Top performers at high-volume dealerships can earn significantly more, sometimes exceeding $10,000 per month or even more during peak seasons. This is largely due to the tiered commission structures and added bonuses that dealerships offer to reward top sellers. However, earnings can fluctuate due to seasonal demand, economic conditions, and individual negotiation skills.
Are car salesman commissions negotiable with customers?
Car salesman commissions are generally not negotiable with customers, as they are an internal compensation structure set by the dealership. The salesperson does not typically disclose their commission or negotiate it directly with the buyer. Instead, the customer focuses on the vehicle’s price, financing, and other features.
That said, a buyer may indirectly influence a salesperson’s commission by negotiating the final sale price or selecting different add-ons and services. Lowering the car price too much can reduce the total gross profit, potentially lowering the salesperson’s commission. As a result, some salesmen may be reluctant to reduce the price below a certain point, although this is driven more by dealership policy than personal choice.
Can car salesmen earn commissions on services and financing?
Yes, car salesmen can earn commissions on services and financing products in addition to the vehicles they sell. When customers choose to purchase add-ons such as extended warranties, gap insurance, maintenance packages, or finance through lenders affiliated with the dealership, salespeople often receive a percentage of the gross profit on those items.
These commissions can be highly lucrative and sometimes represent a significant portion of a salesman’s total income. For example, arranging a financing deal or selling a high-margin protection plan can earn hundreds of dollars in extra commission per sale. As such, sales professionals are often incentivized to upsell and offer financing packages to maximize their earnings.