Auto Dealers Rethink How They Pay Salespeople - 20% of Gross Profit No Longer Works
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Washington DC June 14, 2010; The AIADA newsletter reported that as weak new-vehicle sales combine with dramatically shrunken dealer profit margins on new cars, many dealers are trying new ways to pay their salespeople.
According to Automotive News, the traditional straight commission of 20 percent of gross profit has so squeezed salespeople that dealers fear a wave of departures. A common switch: Pay a base salary plus commission.
An Automotive News informal survey of 235 retailers suggests that about one in three dealers changed his pay plan in the past two years. In a separate response, one in three said he is considering tweaking his pay formula.
Auto retailers say they're slowly losing experienced salespeople to other industries. As a result, dealers are sweetening pay plans. Some auto retailers have stopped paying salespeople a percentage of gross profit. Other dealers are also merging the F&I role into the sales position to fatten pay, or at least they're splitting the F&I income between the F&I and sales professionals.
Some dealers are increasing the small F&I commission they already pay salespeople. Dealers are resorting to sacrifices to keep the sales force intact.
Some, for example, are eliminating the conventional "pack," a lot fee that many dealers subtract from the gross profit before calculating a salesperson's commission.