Car Salesman Salaries (How Much You Can Really Get?)

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How Do Car Salesmen Make Money?

Car salespeople are vital to the auto industry and business. But, it's important to know their pay and legal rights.

We are an employment-focused law firm. We aim to highlight the legal issues in car salespeople's pay. This includes potential disputes and legal protections. Car salespeople often face unique challenges in connection with their employment rights. These arise from commission-based pay and salary disputes.

Why This Information Matters for Car Salespeople

Car salespeople work on commission. This can create complex pay structures and legal issues. Knowing your compensation rights is key. It helps salespeople get fair pay, appropriate benefits, and protection under employment laws.

This article explores how car salespeople can handle issues that deal with pay, contracts, and commissions. It provides insights into sales people and their legal protections.

Car salesmen and women typically earn through a mix of salary, commissions, bonuses, and incentives. Compensation can vary greatly by dealership and individual and job performance.

Overview of Car Salesman Compensation

Car salespeople typically earn their living through a mix of salary, commissions, and bonuses. Understanding how these components work together is crucial for employees in the industry.

Range: In the U.S., car salesmen earn about $38,802 to $54,827 per year. Some reports say the average is $55,811. [1]
Entry-Level Salaries: New salespeople may start with a fixed salary for a few months. Then, they will switch to commission-only pay plans.

Commission Structure

Frontend Commissions: Salesmen typically earn 20% to 40% of the profit made from each car sale. If a car sells for $25,000 with a $1,750 profit, a salesman might earn $350 to $700 per sale, depending on the commission rate.
Backend Commissions: These come from selling extra products (e.g., warranties, accessories). They are usually about 5% of the total price.

Bonus Structures

Monthly Bonuses: Many dealerships offer bonuses based on the number of cars sold each month. For example: Selling 10 cars might yield a bonus of $250, while selling 20 cars could result in a bonus of $1,000.
Manufacturer Bonuses: Salespeople may also receive bonuses directly from manufacturers for selling specific models or achieving certain sales milestones.

Additional Compensation Factors

Sliding Scale Commissions: Some dealerships have tiered commissions. They reward higher sales with higher rates. For example: Selling 1-6 cars may earn a 20% commission, while selling over 16 cars could increase the rate to 35% [2].
Minis and Pack Fees: Sales involving vehicles that have been on the lot for an extended period (known as "minis") may result in reduced commissions. Pack fees (maintenance costs) are also deducted from commissions

Legal Considerations for Car Salesman Compensation

Common Legal Issues with Commission-Based Pay

Commission-based pay is often the subject of legal disputes in the automotive industry. Salespeople should have clear, written contracts. They must outline commission rates, payment schedules, and performance expectations.

Rights During Training Periods

In some cases, dealerships require brand new hires to undergo unpaid or poorly compensated training periods. It’s important for car salespeople to know that minimum wage laws apply even during training. If a salesperson is required to work without pay, this may constitute a violation of federal and state wage laws.

Legal Protections for Commission-Only Plans

Salespeople who work on commission-only plans are entitled to certain legal protections. Federal and state laws require a minimum wage and overtime pay, even for commission-only employees. Salespeople employed without these protections may be entitled to compensation through legal action.

What is a Draw Check?

A typical draw check a car business is a minimum hourly wage at a 40-hour workweek, no matter how long the employee worked for the week. To entice a car salesman to apply with a dealership, the company may up the draw to $2,000 or even more. This flat fee acts as an advance against future commissions.

Previous commissions a car salesman earns from the same average salesperson car salesman the month before are usually paid around the 15th of each month. The dealer will calculate the accumulated total commission, bonuses, and spiff money. The draw amount, taxes, and other deductions will then be subtracted from the balance.

Previous commissions a car salesman earns from the month before are usually paid around the 15th of each month. The dealer will calculate the accumulated total commission, bonuses, and spiff money. The draw amount, taxes, and other deductions will then be subtracted from the average commission balance.

Key Statistics on Car Salesman Compensation Disputes

Class Action Lawsuits:

In early 2018, 33 former salespeople at Rick Hendrick Chevrolet filed a class action lawsuit against the dealership. They alleged fraudulent practices that reduced their commissions. They claimed the dealership misstated vehicle costs. It also failed to pay commissions on holdbacks and other incentives. As a result, their earnings fell to a minimum guarantee of $200 per unit.

Document Fees:

Plaintiffs argued they were entitled to commissions on these fees, as they often had to negotiate prices to make sales.

Overtime Pay Disputes:

A notable case involved Tesla. It settled a federal class action lawsuit. Plaintiffs claimed they were not paid minimum wage or overtime. [5] The lawsuit said Tesla did not qualify for the federal overtime exemption for traditional auto dealers. It highlighted the complex pay structures in the auto sales industry.

Written Compensation Policies:

Legal experts emphasize the necessity for dealerships to have clearly written pay plans. Changes to commission policies must be in writing. Ambiguity can cause disputes over pay.

Minimum Wage Compliance:

Disputes can arise when salespeople claim they don't meet this threshold. This is due to changing commission structures.

FAQs

What should I do if I'm not receiving my promised commissions?

If your employer is withholding or miscalculating your income or commissions, check your contract. It will verify the terms. If the terms are wrong or not being followed, you may have grounds to file a wage claim or take legal action for breach of contract.

Are there legal protections for car salespeople working on commission-only plans?

Yes, federal and state laws ensure that even commission-only workers must receive minimum wage and overtime pay. If your employer fails to meet these obligations, you may be able to recover unpaid wages through a lawsuit.

How can a lawyer help with disputes over my car salesman salary?

An employment lawyer can review details of your job and your contract. They can check for any labor law violations by your employer. If needed, they can help you file a wage and hour claim. They can also represent you in negotiations or court to ensure that you receive the compensation you are owed.

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References:

https://corecommissions.com/guide-car-sales-commissions/
https://carsalesprofessional.com/car-sales-commission-explaine-how-it-all-works/
https://www.autonews.com/article/20180212/LEGALFILE/180219956/hendrick-group-sued-over-commissions
https://www.carolinalaw.com/2018/02/failure-pay-commissions-automobile-sales-employees-north-carolina-wage-hour-attorney/
https://www.reuters.com/legal/tesla-accused-lawsuit-cheating-california-workers-out-wages-2024-04-05/
https://www.employers.org/blog/2022/02/17/default/written-commission-agreements-are-required/