Current Issue

Auto dealers pay more, keep employees longer: study

Comments Email
Auto dealers employee turnover
(Crain News Service photo) On average, salaries increased about 3.5 percent for the year with the increases slightly higher at luxury franchises than at nonluxury ones.

DETROIT (Feb. 19, 2014) — Auto dealers experienced less employee turnover and hired more women and young people in 2012.

Dealers also paid higher salaries, in line with increased productivity.

Those are among some key findings detailed in the 2013 Dealership Workforce Industry Report released late last year by the National Automobile Dealers Association (NADA).

This is the second annual workforce report. More than 2,240 car dealerships participated in the study.

"This is by far the most comprehensive and timely study on the dealership workforce ever produced, and serves as a tremendous resource to help dealers 'step up their game' to gain an edge on the competition," a NADA official said.

Pay tracks productivity

On average, salaries increased about 3.5 percent for the year with the increases slightly higher at luxury franchises than at non-luxury ones, said Ted Kraybill, president of Delta Trends, a research and consulting firm in Largo, Fla. Delta Trends designed and managed the study for NADA.

The salary increase is in line with boosts in productivity, Mr. Kraybill said.

"If you look at productivity as gross profit per employee per month, it grew by 3 percent," Mr. Kraybill said. "My conclusion is dealerships have not increased their pay plans per se, but what has happened is, as retention goes down, and the productivity of those employees goes up, they are paid the same percentage of the gross profit they generate, so they are making more."

The study—based on 2012 data—showed that total car dealership employee turnover in 2012 dropped 1 percentage point to 35 percent from the previous year. That is lower than the U.S. Bureau of Labor Statistics' estimate of employee turnover in the overall private sector of 41 percent.

More women

The job of sales consultant had the highest turnover rate, the study showed. About 62 percent of sales consultants quit or were terminated over the course of a year, Mr. Kraybill said.

"Nearly 40 percent of the people who are hired into sales consultant positions are gone within 90 days," he said.

In 2012, according to the study, dealerships started hiring more women. The percentage of new hires who are women rose 2 percentage points to 19 percent during the year at the average dealership, the study said.

"The impact on the total active workforce was a 1 point rise," Mr. Kraybill said.

That means the percentage of women employed at the average auto dealership rose from 17 percent of the roster to 18 percent, he said.

"It is a small rise," Mr. Kraybill said. "But the trend is they are starting to hire in more females and it is slowly increasing the percentage of female employees."

Gen Y gains

A more dramatic increase was in the percentage of Generation Y employees hired in 2012, Mr. Kraybill said. The study defines Gen Y as those born in or after 1982.

Mr. Kraybill said 41 percent of all dealership new hires in 2012 were Gen Y workers compared to 34 percent in 2011.

The percentage of Gen Y employed in the dealership workforce is 23 percent, the study said. That's up from 19 percent.

"And 41 percent of the dealership new hires were Gen Y," Mr. Kraybill said. "The data indicates the pool that dealerships have to draw from tend to be more of the unemployed."

Back-end boost

On average, dealership employees earn 27 percent more than the average weekly earnings of all U.S. private sector employees, the study said.

The dealership department that generates the highest income opportunity is the finance and insurance (F&I) department, the study said.

F&I managers had the highest income growth in 2012, Mr. Kraybill said. Their income rose by 8.4 percent year-over-year to $128,434.

The F&I department is typically one of the highest profit centers in most dealerships. The industry's average F&I revenue per vehicle retailed through April this year was $869, and the average F&I penetration rate was 75 percent, according to Paul Faletti, CEO of NCM Associates Inc. in Overland Park, Kan.

"It's a trend that started in 2009," Mr. Kraybill said. "In 2009, the F&I manager's income was actually less than the average sales manager's income. Over the years, the F&I manager's income has actually overtaken and surpassed that of sales managers."

Service pay gains top sales

The average annual compensation for a sales manager increased by 6.5 percent to $122,549, Mr. Kraybill said.

"What's happening is there is more emphasis being placed on the back-end growth as the margins are shrinking on new cars," Mr. Kraybill said. "When you increase your F&I gross, the pay out and the commission stays relatively stable, it's naturally going to increase the F&I managers' salaries."

Service managers saw the second-highest income boost. Their income rose by 8 percent followed by a 7.8 percent boost in sales consultants' income. In other words, sales consultants' pay rose faster than that of their managers.

"That's because the average units sold per sales consultant went up," Mr. Kraybill said.

The study also found that the median income of individual dealership employees is nearly equal to the 2012 U.S. median household income of $51,017.

This report appeared on the website of Automotive News, a Detroit-based sister publication of Tire Business.

More Polls>

TB Reader Poll

Previous | Published March 18, 2019

Where can you expect to see the most growth in 2019?

Tire sales
45% (34 votes)
General automotive service
15% (11 votes)
Brakes, shocks and other undercar services
7% (5 votes)
Add-on business
15% (11 votes)
Anywhere we can get it.
19% (14 votes)
Total votes: 75
More Polls »