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Car Sales Pay Plan Keywords
Car Shopping > Pay Plan > Keywords >
The below keywords are narrowly related to automotive sales pay plans, so I will address them here instead of the site's main glossary page. Why am I listing them at all? Because I want to drive home the point that car salespeople are paid on gross profit NOT gross sales.
Back End The pay plan for an auto sales person may or may not include a percentage of the profit made by the dealership's finance and insurance office. An example of something sold by the finance and insurance department would be an extended warranty. I hope to go over extended warranties in a future page, but for now, an important takeaway is: be skeptical of warranties not backed by the actual vehicle manufacturer.
Draw Payment that may be made to a sales employee if the sales employee is in a training period upon starting or simply has no sales in a given pay period. Expect the draw to be repaid to the dealership in future periods when the sales employee has sales.
Front End Subtract what the customer paid for the car minus what the dealer paid for the car. That is the front end gross profit.
Mini The formula for determining the gross profit subject to commission multiplied by commission yielded less than some given value. In that case the salesperson receives a fixed amount: a "mini".
Protected Against Commission ( PAC or PACK ) Protected against commission does NOT mean that the customer is protected against paying a commission. It means that the dealership is protected from paying the salesperson a commission if the profit is below a given threshold. More common on used cars than new cars, but can apply to new cars as well. Subtract the PAC number from gross profit, however gross profit is defined by dealership. Gross profit minus amount protected against commission is what the sales person is paid a commission on. A dealership whose business model is to charge as much per vehicle as the market will bear might have a high PAC. A dealership whose business model is volume might have a low or zero PAC. Given that used cars often have higher PACs than new cars and that vehicle manufacturers provide sales incentives for new cars, in a page to come I plan on engaging in the blasphemy of saying that used cars are often overpriced relative to new cars.