Is it possible that any set of numbers could be more convoluted than the one we see when we're buying a car?
Duane Overholt says yes: The numbers for the dealership's commission on your next car are even more dizzying.
Overholt is a former car salesman and dealership manager who now runs a consumer advocacy website, stopautofraud.com. He says there's a big misunderstanding when it comes to the salesman's pay.
"Most people think car salesmen make a lot of money," Overholt said.
Overholt showed us dealer contracts fully loaded with figures and jargon— "7% of gross," "2% of back end," "3% of net gross profit."
What's all that mean? Nothing, Overholt said, because most car salesman are not paid a percentage of your sale. Instead, they receive a flat fee.
"Where people think they're making $150 or $200 a car or $300 commissions, they're actually making about $50 commission. A flat rate," he said.
The federal Bureau of Labor Statistics says the average salary for a sales employee at a car dealership is $43,000 annually.
A spokesman for the National Auto Dealers Association concurred with that rate of pay. He also confirmed that flat fees, not percentage-based commissions, are the norm in today's car salesmen's compensation packages.
Although salespeople are paid a flat fee, Overholt says the dealership's managers are likely to be paid based on how much profit they're making on your sale. And he says their take can be sizable.
"[It's] an average of 12 percent to the finance manager; two percent to the general manager; two percent to the sales manager," he said.
But Carroll Lachnit, features editor at Edmunds.com, warned us that bellyaching over how much the salesman's cut is might be a fool's errand. She said margins are tighter than ever and that the sales department isn't the cash cow it used to be.
"People have the impression that that must be where all the bucks are coming from. In reality's that's not," she said.
Lachnit said the shop has replaced sales as the lot's real profit driver.
"That model has really changed considerably," she said.
The NADA also confirmed that the parts department and service department often keep dealerships financially afloat.
That said, will we ever be able to buy a car without a middleman? Right now we can browse, build, and broker a car sale on the Internet. But we cannot close the deal via the web.
Will that ever change?
"The answer to that is: we hope so," Lachnit said. "But the reality is that the way that the laws are set up in the U.S. around dealership franchises we're not there yet. And we may never be there."
FOX 13 / WTVT-TV
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