Car Dealerships

The automotive industry is one of the most commission-driven sectors. With over 1 million car salespeople in the US and annual vehicle sales exceeding $1 trillion, the industry generates significant commission payouts every month. For the typical car salesperson, variable pay represents 40-60% of total compensation.

This page explains how commission structures work at car dealerships, which models are most common, and how modern commission management can streamline a complex calculation process.

Commission Models in Automotive

Car dealerships typically use a combination of several commission types:

1. Vehicle Commission

The primary commission form. Calculated either as a percentage of gross profit or as a flat amount per vehicle sold:

Vehicle Type	Typical Commission
New vehicles	20-30% of gross profit or $200-500 per unit
Used vehicles	25-35% of gross profit
Fleet sales	$75-200 per unit (lower margin)
Electric vehicles	Often higher rate, 30-40% of gross

2. F&I Commission

When customers finance through the dealership, salespeople receive commission from the finance company. Typically 0.5-2% of the loan amount or a flat $50-200 per deal. This commission type can represent 20-30% of a salesperson's total earnings.

3. Accessories and Add-ons

Higher-margin products like winter tires, protection packages, roof racks, and electronics often yield 25-40% commission on gross profit. Skilled salespeople can earn as much on accessories as on the vehicle itself.

4. Service Contracts and Insurance

Commission on service agreements, extended warranties, and GAP insurance. Typically $25-100 per product sold. Some dealers offer accelerators for high attachment rates.

Pay Structures for Car Salespeople

The typical car salesperson in the US has an OTE of $60,000-90,000 annually. Top performers at premium brands can exceed $150,000. Pay structure varies:

Pure commission: No base salary. The salesperson lives on commission, typically with higher rates. Most common at independent used car dealers.

Low base + high commission: Base salary of $2,000-3,500/month combined with commission and bonus programs. The most common model at franchised dealerships.

Higher base + lower commission: Base salary of $4,000-5,500/month with more moderate commission rates. Often used at premium brands with longer sales cycles.

Bonus Structures

Beyond base commission, most dealerships use bonus programs:

Monthly bonus: Extra payout for achieving sales targets. Typically $500-2,000 at 100% attainment. Many use tiered structures with higher bonuses for overperformance.

Quarterly and annual bonus: Larger bonuses for consistent performance. Can represent $3,000-10,000 per quarter for top salespeople.

Manufacturer bonuses: OEMs often pay direct bonuses to dealers and salespeople for selling priority models or achieving brand-specific targets.

Challenges in Commission Calculation

The automotive industry has several complex elements:

• Variable margins: Gross profit varies significantly from vehicle to vehicle. The same model can have different margins depending on purchase price, rebates, and negotiation.
• Chargebacks: If the customer cancels or the deal unwinds, commission often must be returned.
• Split deals: When multiple salespeople contribute to a sale, commission must be divided. Rules vary between dealerships.
• Timing: Commission is typically paid when the vehicle is delivered, not when the contract is signed.

Studies show that finance departments at car dealerships spend 15-25 hours monthly on commission calculation. With 10-30 salespeople and hundreds of deals, complexity becomes significant.

Industry in Transition

The automotive industry is undergoing major changes. EVs, online sales, and new agency models are affecting commission structures:

Agency models: More brands are moving to agency models where prices are fixed and the dealer receives a set margin. This reduces negotiation room and changes the commission basis.

Online sales: When customers buy online, the traditional salesperson role is challenged. Some dealers give commission to the salesperson in the customer's geographic area, others have dedicated online teams.

FAQ: Commission for Car Salespeople

What does a car salesperson earn?

The average car salesperson earns $50,000-75,000 annually. Top performers can reach $100,000-150,000, while beginners typically start at $40,000-50,000 including commission.

When is commission paid?

Typically when the vehicle is delivered to the customer. Some dealerships pay monthly, others per sale. F&I commission may have longer payout periods.

Can commission be taken back?

Yes, for cancelled deals or returns within the cooling-off period. Some dealerships also have clawbacks on financing if the loan is paid off early.

How do EVs affect commission?

EVs often have higher list prices but lower service needs. Many dealerships compensate with higher commission rates on the sale itself. Accessory sales become more important for total earnings.