Car Dealer Insider July 15, 2008
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Car Dealer Insider July 15, 2008

Dealership pay plans in a down market

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Dealership pay plans in a down market

The mid-1980s were great years for car dealers, regardless of franchise. Profits were plentiful and dealership managers shared in the bounty if their pay plans were heavily weighted toward commissions and bonuses. By the late 1980s, however, the auto retailing landscape had changed dramatically. Vehicle sales tumbled and dealers were left with a quandary: Mangers who had been enjoying six-figure incomes during the good times, found they couldn't make ends meet when their commission-based pay was cut in half. Should the dealership owners adjust the pay plans or tell the managers that it was time to share the pain?

At the same time, a successful multi-franchise dealer in southern New Jersey was faced with the opposite dilemma: During the boom years, this dealer had put all of his managers on straight salaries. When vehicle sales were strong, this dealer saw his profits skyrocket, so much so that was able to enjoy perks like a private jet and a chauffeur-driven limousine. But when business turned south, he decided his management pay plans "weren't working anymore," and he needed to make some dramatic changes.

Fast-forward

With few exceptions, business for franchised car dealers these days is not good, to say the least. Not only are dealership profits suffering, but dealership managers, having gotten used to earning good money on the upside of their compensation plans, may find that the pain from the ride back down is more than they bargained for.

So with the industry hitting one of its cyclical low points, this seems like an appropriate time for dealers to revisit their compensation policies and adjust their dealership pay plans to better rationalize their approach to this major dealership expense category.

Let's consider three basic types of dealership pay plans,... (289 of 1154 words)

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