How Much Do Car Dealers and Salespeople Earn from New Car Sales in North America?
The earnings of car dealers and salespeople in North America can vary significantly based on several factors, including the dealership's location, the manufacturer, the specific vehicle being sold, and economic conditions. This article will provide a detailed breakdown of the earnings structure in the new car sales industry.
Dealer Profit Margins
Car dealers and their sales teams earn a portion of the transaction price, but the pure profit margin comes from the resale of the vehicle. This margin can range widely depending on the vehicle model, its options, and the overall demand.
Base Model to Top of the Line
Base Model: The profit margin on a base model vehicle is generally lower. It can range from $1,000 to $2,000, depending on the brand and the market demand.
Top of the Line: For higher-end models or those with many options, the margin can increase significantly. It can range from $3,000 to $7,000 or more. The sales of luxury vehicles or those with extensive customization options can yield higher profits.
Holdback and Incentives
Holdback: Manufacturers often provide a holdback, which is the amount that the dealer gets back from the manufacturer after a certain period of time. This can range significantly, often being part of the overall profit margin on the vehicle.
Incentives and Bonuses: Dealerships also receive incentives from manufacturers based on sales volume. These can further increase the overall profit margin on a vehicle. However, these incentives can vary widely, and not all dealerships benefit equally.
Salesperson Earnings
Commission Structure: Salespeople typically earn a commission based on the profit margin of the vehicle sold. This can range from 20% to 30% of the dealership's profit on the sale. For example, if a dealer makes $2,000 on a sale, the salesperson might earn $400 to $600.
Flat Fees: Some dealerships pay a flat fee per vehicle sold, which can range from $100 to $500, regardless of the vehicle's price. This flat fee is often an additional income source for salespeople.
Bonuses: Many dealerships offer bonuses for meeting sales targets or for selling specific models. These bonuses can significantly boost a salesperson's income, making the overall earnings more variable and performance-dependent.
Overall Earnings
Average Annual Income: According to various industry reports, the average income for a car salesperson in North America can range from $40,000 to $80,000 annually, depending on sales volume, location, and experience. Top performers can earn over $100,000 per year.
Conclusion
Overall, the profit for dealers on new cars can vary widely, ranging from $1,000 to $7,000 or more, influenced by the vehicle model, options, and market conditions. Salespeople typically earn a percentage of the dealers' profit, supplemented by bonuses. This structure leads to variable annual incomes based on sales performance and other factors.
Understanding these variables can help both potential car buyers and aspiring car sales professionals to better navigate the car sales industry and make informed decisions.