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This question is about car sales representative salaries.
How are car salesmen paid?
Most car salesmen are paid through commission. The rates of commission will vary based on the dealership and the state in which the salesperson works. In most cases, the commission is based on a percentage of the profit.
The most common commission-based pay for salespeople seems to be a 25% cut of the "front-end" profit and a 5% cut of the "back-end" profits. The front-end profit refers to what is made off of the purchase price of the car.
The back-end profits come from things like extended warranties or gap insurance that are done through the finance office.
For example, if a salesperson sells a car for $25,000 and there is a $1000 profit or "gross" on the front end, they will be paid a $250 commission. If the customer finances through the dealership and an additional $1000 are made on the back end, the salesperson will get another 5%, or $50 -- total commission before taxes is $300.
What is important to note about this type of structure is that the salesperson only gets paid if they sell a car. If they don't sell a car, they don't get paid. They are in no way compensated for the time that they spend with a client.
This can be problematic when a customer comes into the dealership and asks to test drive a few cars and the salesperson spends time with them showing the vehicles, crunching the numbers, and taking hours out of their day for them to walk away without purchasing a vehicle.
This means that the salesperson spent hours with you and received absolutely no compensation for it.
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