How Much Commission Does a Salesman Make on a New Car?

The amount a car salesman makes on a new car sale depends on the vehicle type, sales price, manufacturer discounts and dealer payment plan. Salesmen can often make more money from a used car sale as prices are more flexible. To better understand the variations of new car commissions, consider the different ways a dealer can pay its sales staff.

Commission Amount

Many salespeople make 20 to 30 percent commission on a new car's profit although this amount varies by dealer and area. Profit for a new car is not substantial because of negotiations and a buyer's ability to review the manufacturer's suggested retail price (MSRP) and invoice amounts online. Before negotiations, profit for a new car may be as low as $600; but as a car's MSRP increases, so does profit. Consider that 20 percent of $600 is only $120 in commission.

Flats

Some new car dealers do not pay commission for new car sales but offer a flat amount for each sale instead. Rather than make a percentage of profit, the salesperson makes $50 to $250 for every new vehicle sold, without regard for profit. Commissioned salespeople are often paid a flat fee if profit is non-existent. For example, if a dealer sells a vehicle that doesn't warrant enough profit to pay the salesperson, the salesperson automatically makes $100, despite dealer loss. Salespeople who share deals, or have to split the profit with another salesperson, also split the flat fee.

Additional Earnings

Aside from selling a car, a dealership offers buyers additional purchase options, such as extended warranties, paint protection or car accessories. Additional profit beyond the sale of the car is known as back-end profit, or additional profit made in the finance office. Some salespeople make a flat fee for other profit items while some are paid a percentage of the profit. Some dealerships pay the finance manager only, but many offer some form of pay to a salesperson when enticing the customer to purchase more items or apply for financing.

Manufacturer Offers

Many new car manufacturers offer salespeople extra profit for selling new vehicles. The extra pay has nothing to do with the dealership or the amount a car sells for. For example, every time a salesperson sells a certain model vehicle, the manufacturer offers $100 in pay. Sometimes this pay varies; the manufacturer can allow "spins," or a computerized game that allows the salesperson to spin a money wheel to make more money. Manufacturer pay is not often taxed, meaning the salesperson receives the full amount and must claim the income when taxes are due.

References

• AOL Autos: How Much Do Car Salesmen Earn?
• Edmunds: Where Does the Car Dealer Make Money?