Car Salesman Pay Plans That Reward the Right Behavior
Car salesman pay plans shape behavior more than any meeting or memo. People do what they are paid to do. If your plan rewards the wrong thing, no amount of coaching will fix the result. Here is how to think it through.
Start with the behavior you want
Before looking at structures, list what you want salespeople to do every day. Most GMs would write something like this: follow up with every customer, protect gross where possible, sell volume, earn good reviews and stay with the store. Now look at your current plan and ask which of those it actually pays for. The gaps are usually obvious.
The common building blocks
Nearly every plan is a mix of a few parts. The details vary widely by store and by state.
- Commission on gross: a share of the profit on each deal. It rewards holding gross but can discourage a salesperson from taking a thin deal the store wants.
- Per-unit flat: a set amount for each vehicle sold. It rewards volume and is simple to understand, but it does not reward gross.
- Volume bonus tiers: extra pay when a salesperson reaches unit targets in a month. It drives a strong finish but can cause deals to be pushed between months.
- Base pay or draw: a floor that gives stability, especially for new hires.
- Spiffs: small, immediate rewards for specific actions, such as selling an aged unit.
Matching the plan to your store
There is no single best plan. The right mix depends on how you sell.
- One-price or low-negotiation stores often lean on per-unit pay and customer satisfaction, since the salesperson has little control over gross.
- Traditional negotiating stores often lean on gross commission with a minimum per deal.
- High-volume stores often use tiers to push unit counts.
- Stores with many new salespeople often add a base or training pay period so beginners can survive the learning curve.
Pay for the activities that create sales
Sales are the result. Activities are the cause. A small part of the plan tied to activities can lift everything else. Consider rewards for things a salesperson fully controls.
- Appointments that show.
- Complete CRM records for every customer.
- Follow-up tasks completed on time.
- Positive reviews that mention the salesperson by name.
Keep these simple. One or two activity rewards are plenty. More than that and nobody remembers them.
How appointment traffic changes the math
When the store runs a sales event that delivers set appointments, salespeople have more at-bats without prospecting for them. Some dealers adjust pay for event deals. Others keep the standard plan and treat the extra traffic as the reward. Either can work. What matters is deciding before the event and telling the team clearly, so nobody is surprised on payday.
Keep it simple enough to calculate on a napkin
If a salesperson cannot work out what a deal pays within a minute, the plan is too complicated to motivate anyone. Test it. Hand the plan to a new hire and ask them to calculate three sample deals. If they struggle, simplify.
Also put it in writing, have each salesperson sign it, and avoid changing it mid-month. Sudden changes cost trust faster than any other management decision.
A note on wage and hour rules
Minimum wage, overtime, draws, chargebacks and commission agreements are regulated, and the rules differ from state to state. This article is general information, not legal advice. Review any pay plan with counsel before you roll it out.
Frequently asked questions
Is commission or flat pay better?
Neither is better everywhere. Commission suits stores where the salesperson influences gross. Flat pay suits stores where price is largely fixed.
How often should a pay plan change?
As rarely as possible. Review it once a year, and give plenty of notice before any change takes effect.
How do I keep top salespeople from leaving?
Pay fairly, pay accurately and on time, and give them enough opportunities. Good salespeople leave stores where the floor is empty or the pay is unpredictable.
See what an event would look like for your store
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