That’s one of the main reasons you get swarmed by car salesmen the moment you set foot in a car dealership.
You see, according to Carlton Wolf in his article, “How Car Salesmen Get Paid | Sales Commissions”, car salesmen are most commonly paid using these two sales compensation plans:
- Fixed or Set Salary
- Commission Only
Fixed or Set Salary. This type of pay plan is pretty simple and easy to understand. Car salesmen basically get a fixed amount on their pay check every month. This type of pay plan isn’t commonly used, because car dealerships are obliged to pay their salesmen a monthly pay check whether they meet their sales quotas or not.
If you’re a salesman who’s not the type to make a regular sale week in and week out, then the fixed salary pay plan is your best friend – if you can find a dealership that actually still uses this pay plan. Take note however, that if you consistently do not produce enough car sales month after month, the car dealership is not likely going to want to keep you on their payroll.
Now, if you’re really good at selling cars (yes, even the ones that nobody wants to buy), then this pay plan doesn’t work to your advantage, because it won’t matter how many cars you sell, you’re still going to get the same pay check month after month.
Commission Only. Most car dealerships use the Commission Only pay plan. This basically means that if you don’t sell a car, the dealership doesn’t cut you a check. There are some states that require a minimum wage amount to be paid but no one wants to rely on that. This kind of pay plan isn’t for the weaklings. If you’re shy, lacking in confidence, or if you just don’t have what it takes to sell a car, then it’d be wise if you steer clear.
If you’re sitting on the opposite end of the spectrum (lucky you), then there’s a huge possibility that you can make up to $100,000 a year (or more) with this pay plan.
Believe it or not, car salesmen who have a knack for selling have been known to turn down managerial positions because they want to continue selling – plus, well, their selling skills help them keep a nice and comfortable financial cushion.
Wait, there’s more!
Now the pay plans don’t stop there. The two mentioned above are only the most common ones, but Neil Kokemuller of Demand Media talked about another kind of pay plan in his article, “Advantages & Disadvantages of Salary Plus Commission”.
Salary Plus Commission. More established car dealerships sometimes pay their car salesmen a base salary plus commissions, depending on the amount or number of cars they sell. Sounds like a dream come true for car salesmen everywhere, right?
This type of pay plan aims to reward excellent performers by giving them their due. It makes for a competitive workplace and car dealerships that utilize this pay plan often find themselves with car salesmen who go above and beyond just to be able to sell cars. Some incentive plans now are even rewarding sales teams based on customer reviews such as friendliness, etc.
The downside to this pay plan is usually felt by the folks that are in charge of payroll. Imagine having to deal with the complexity of calculating for the sales reps’ individual monthly salaries plus their commission – of course, it doesn’t help that sales reps don’t all sell the same number and type of cars.
Properly executed Salary Plus Commission pay plans are usually complex. But what car dealerships must realize is that it’s no longer necessary for their payroll staff to go through the nightmare of manually calculating base salary plus commissions (and bonuses) every month.
Yes, an automated solution for calculating commissions has already been invented. Actually, it’s been around for a few years now. Most dealerships use Excel but that is fraught with risks and errors.
Two such solutions are QCommission and Easy-Commission. These are web-based applications that can handle many different types of variations in any salesmen’s pay plans, while being able to compute for monthly salaries accurately and on time. With these applications, car dealerships can also easily share the details of the computations with their sales reps, allowing for clear communication and transparency.
Reward the hustle of your sales team by paying the correct amount of commissions and additional incentives on time every month. Good sales people are hard to keep so do not let legacy Excel processes drag down your ability to #PayPeopleProperly.
For more information on QCommission and Easy-Commission, visit their websites today:
She has a bachelor's degree in Psychology and she's a strong believer in the powers of positive reinforcement as well as work-life balance.
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