While purchasing a car, whether used or new, you need to be very cautious while choosing a pay plan. There are various types of car dealership pay plans. Having a clear idea about such pay plans will help you while purchasing your used and new cars. These include:
25% commission for the sales persons:
The most common type of pay plan is where the sales person gets a 25% commission. The commission is usually calculated on the front end gross profit. For example, suppose a dealer purchases a used car and gets it repaired, let’s say the total deal costs him approximately $10,000. Though the non commissionable profit paid to the dealer usually varies, it would fall somewhere within $500. So while fixing the cost, the dealer will include his sales person’s commission. Therefore, the sale price of the car would be fixed at around $15,995, with the front end gross profit being $5,495. In such a case, the commission of the sales person would turn out to be $1,373.75.
However, the real picture is quite different. All car sales persons do not receive 25% commission of the front end gross profit. Especially with the new cars, the sales persons are generally paid a mini, which is actually a flat amount of around $100 paid to the sales person if his commission amount is less than expected.
Moreover, the average number of cars sold by a sales person in a month is around six to eight, which is usually less than their targeted goal. Therefore, you can take advantage of the situation by letting the sales person know that you will tip him, if he speeds up the purchasing process and gets you a desirable price.
You can conveniently tip the sales person $100 to $200 on the condition that he negotiates your invoice price quickly enough. However do not let the dealer know anything about this particular deal as it may result in the sales person losing his job.
Increased commission percentages:
Most of the dealers offer an attractive incentive for their sales persons if they sell a pre-decided number of cars within certain duration. Such targets are usually accompanied by increased commission percentages ranging from 30 to 35 % for selling at least thirteen to fifteen used and new cars in a month. Some car dealerships also provide bonuses for their sales people. But the conditions for achieving them are often unreasonably tough and most sales people fail to obtain them. Even under this pay plan you can offer to tip the sales person an amount that is less than their incentive, but much more than the mini usually paid to them.
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