Sales Commissions and Team Permissions for Used Car Dealers

The first time you hire a salesperson, two questions arrive at once: how will they be paid, and what should they be allowed to see? Both are easier to answer before there is a problem than after. A clear commission plan keeps everyone motivated, and sensible permissions keep sensitive numbers where they belong.

This is general information to help you think it through. Pay rules, including overtime and classification of workers, differ by state, so check with your state labor agency or an employment professional before finalizing a plan.

Common commission structures

Independent dealers tend to use one of a few structures, sometimes mixed together.

• Percentage of gross profit. The salesperson earns a share of the profit on each car. This ties pay directly to the quality of the deal.
• Flat fee per car. A fixed amount for every sale. It is simple and predictable, but it does not reward negotiating a better price.
• Tiered or volume bonus. A higher percentage or an extra bonus once the salesperson passes a set number of sales in the month.
• Base plus commission. A modest guaranteed amount plus commission, which gives stability during slow months.

Decide what profit means before you promise a percentage

The biggest source of commission disputes is vague wording. If you pay a percent of profit, spell out which profit. Is it sale price minus purchase price, or minus total cost including repairs and auction fees? Are fees or add-ons included? What happens when a deal is unwound or the customer returns the car?

Put the definition in writing and apply it the same way to everyone. If you calculate commission on gross profit after all costs, your records of costs per car have to be reliable, which is another reason to track every expense on the vehicle record.

A hypothetical example

These numbers are for illustration only. A car sells for $12,000 with total cost in the car of $9,500, which makes gross profit $2,500. At a 20 percent commission on gross profit, the salesperson would earn $500 on that deal. If the same car were paid as a flat $300 per sale, the salesperson would earn $300 regardless of how well the deal was negotiated. Our sales commission calculator lets you try different plans against your own numbers.

What each team member should see

Not everybody needs access to everything. A reasonable starting point:

The point of hiding cost and profit is not distrust. A salesperson who knows exactly what you paid may negotiate differently, and cost information can leave the building when someone moves to a competitor.

Review commissions with real reports

At the end of each pay period, pull a report that lists sales by salesperson, with the sale price, cost and profit for each deal. Review it together before payroll so there are no surprises. Keep the reports with your payroll records.

Keep it simple and written down

A commission plan that fits on one page is easier to follow and easier to defend. List the percentage or amount, the definition of profit, when commission is paid, and what happens if a deal is unwound. Have each salesperson sign a copy, and keep it with their file. If you change the plan later, give notice and put the new version in writing, so there is never an argument about which terms applied to which deal.

How DMS Apex helps

DMS Apex lets you add team members with permissions, and those permissions can hide costs and profit so salespeople see the cars and deals they need without seeing what you paid. A salesman report shows sales by person, and profit and loss and deposits reports back up the rest of your month. Reports can be exported to Excel or CSV or printed for payroll. Your dealership has a private database, and the price is $28 per month flat with a 15-day free trial and no contract.