Should Dealers Provide Commission Only Pay Plans?

What Truly Motivates Your Sales Team?
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Commissions are used to inspire hard working salespeople to sell more cars and turn more profit. The more the salesperson makes, the more the dealership makes and vice versa. This provides a mutually beneficial relationship between the sales staff and their employers. Unfortunately, it can also lead to some complications.

The sales team is reliant on the Desk Manager to pack a lot of commissions on the first offer so they have room to negotiate. This can cause tension if two sales members acquire a signature on the first pencil for a similar unit, but do not make a similar profit.

Staff members who work only on commission are more likely to develop an increased sense of stress. While some may use the stress as motivation, others may notice a decrease in morale as well as job performance.

This doesn’t mean that financial incentives should be ignored. They, along with other motivational tools, should accompany the pay plan that’s already in place.

A competitive pay plan varies depending on the number of hours required by each salesperson. Some dealers may require sales staff to work six days a week for eight to ten hours a day. Others, five days for up to twelve hours. Some dealers let their sales staff choose how often and for how long they work. 

Examples of Base+Commission Pay Plans

For dealers that require their sales teams to work more than 40 hours a week, a base salary of $40k or more should be considered in addition to commissions. (Some dealers start a base salary as high as $60k plus commission.)

Dealers who let their sales staff choose their own hours could offer a tiered pay plan based on the number of hours worked.

There are a few dealers who pay their sales staff hourly with added commissions and bonuses. (A competitive pay rate I’ve seen for this in North Carolina is $10/hour plus commissions of 30% of gross (or $200 for non-profitable deals). The hourly rate increased to $15/hr after 5 pm and on weekends. Since these employees were on an hourly plan, they also received overtime pay and extra pay on Holidays.)

Offering a base salary while letting sales staff choose their own hours will increase motivation and morale. It will also provide a better atmosphere for buyers to purchase their vehicles which can lead to an increase in sales and profits.

Summary

There’s a reason dealerships offer commissions to their sales team. It drives hunger and motivation. It allows their team to have a shared interest in the profits of each sale. It also ensures that each salesperson is being paid what they’re worth… in a way.

In a commission only pay plan, sales members aren’t paid anything for their time if another staff member angers their customer, if the customer can’t get financing/doesn’t have a cosigner, or if an emergency comes up and their customer needs to leave. Providing a base pay along with commissions makes it easier for your staff members to handle complications and enjoy working at their dealership.

For more information on employee motivation and other incentives, visit our Blog or contact our team at [email protected]

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