The automotive sales industry offers lucrative opportunities for those who excel in salesmanship, and new-car salespeople play a crucial role in helping dealerships meet revenue goals. The earnings of a new-car salesman in the United States can vary widely depending on factors such as location, dealership size, experience level, and commission structures.
In this article, we’ll break down how much a new-car salesman can make, the components of their compensation, and factors that influence their earnings.
Average Salary for a New-Car Salesman in the U.S.
The total earnings of a new-car salesman typically include a combination of a base salary and commissions. According to industry data, here’s a snapshot of what new-car salespeople earn:
- Base Salary: The average base salary for a new-car salesman is around $20,000 to $30,000 annually.
- Commissions: Commissions often make up the bulk of a car salesman’s income. Depending on sales performance, commissions can range from $10,000 to $80,000+ annually.
- Total Annual Income: Combining base salary and commissions, the average total annual income for a new-car salesman in the United States is approximately $40,000 to $70,000. Top-performing salespeople can earn over $100,000 per year.
Compensation Structure
Car salespeople are generally paid through a combination of the following:
1. Base Salary
Most dealerships provide a modest base salary to ensure that salespeople have a steady income even during slow sales periods.
2. Commissions
Commissions are the primary driver of a salesperson’s income. The commission rate varies but typically ranges from 20% to 25% of the gross profit on a car sale. Gross profit is the difference between the car’s sale price and its invoice price (what the dealership paid for the car).
3. Bonuses and Incentives
Many dealerships offer bonuses for meeting or exceeding sales targets. Bonuses may include:
- Monthly or quarterly sales quotas
- Selling high-margin vehicles or specific models
- Positive customer satisfaction ratings
4. Spiffs
“Spiffs” are short-term incentives offered by dealerships or manufacturers. For example, a salesperson might earn an extra $50 to $500 for selling a particular car within a promotional period.
Factors That Influence Earnings
1. Location
Salespeople in high-demand, high-cost-of-living areas (e.g., California, New York, Texas) often earn more due to higher car prices and increased sales volume.
2. Type of Dealership
Luxury car dealerships (e.g., BMW, Mercedes-Benz, Lexus) generally offer higher earning potential compared to standard brands due to higher profit margins.
3. Experience Level
Experienced salespeople typically earn more as they build repeat customers, establish relationships, and refine their skills. Entry-level salespeople may take time to reach their earning potential.
4. Performance
Top-performing salespeople who consistently meet or exceed sales targets can earn significantly more than average, thanks to high commissions and bonuses.
5. Market Conditions
Economic conditions and consumer demand can impact car sales. For example:
- In strong economic times, salespeople benefit from higher sales volume.
- During downturns or supply chain shortages, earnings may decline due to reduced inventory and buyer activity.
Top Earners: How Do They Succeed?
The top earners in car sales share several traits and strategies:
- Exceptional Customer Service: They build long-term relationships and generate repeat business.
- Strong Product Knowledge: Being well-versed in the features, benefits, and pricing of vehicles makes them more effective at persuading customers.
- Negotiation Skills: They excel at closing deals that satisfy both the customer and the dealership.
- Consistent Networking: Leveraging personal networks and referrals boosts sales opportunities.
Pros and Cons of Being a New-Car Salesman
Pros
- Earning Potential: High-performing salespeople can earn a six-figure income.
- Dynamic Work Environment: Every day brings new customers and challenges.
- Career Growth Opportunities: Salespeople can move into management or other roles in the automotive industry.
Cons
- Variable Income: Earnings fluctuate based on sales performance and market conditions.
- Pressure to Meet Targets: High-pressure environments can lead to burnout.
- Long Hours: Evening, weekend, and holiday shifts are common.
A new-car salesman in the United States can earn a comfortable income, with total annual earnings ranging from $40,000 to $70,000 on average. For top performers, the earning potential exceeds $100,000, driven by commissions, bonuses, and incentives. Factors such as location, dealership type, and experience level all play a role in determining income.
While the job offers high earning potential and career growth opportunities, it requires strong sales skills, a customer-focused approach, and resilience in a competitive environment. If you’re considering a career in car sales, understanding the compensation structure and market dynamics is key to maximizing your success.