Car dealers are raising their employees’ pay and are getting higher productivity for it. But dealers still suffer from high sales staff turnover and struggle to hire women and fill some fixed-operations jobs.
Those are among the conclusions from NADA’s fourth annual Dealership Workforce Study released today. The study is based on data collected in 2014.
Although pay for sales jobs rose less than for other dealership positions, overall it’s good to work at a car dealership, the study said.
In 2014, the median weekly income for all new-car dealership employees increased 5.1 percent to $1,026. On average, dealership workers earned about 29 percent more than those in the U.S. private sector overall, according to the study, citing data compiled by the Bureau of Labor Statistics.
“These are very good-paying jobs in terms of benefits, but it’s not bringing people in,” Steven Szakaly, chief economist for the National Automobile Dealers Association, said in an interview with Automotive News.
The difficulty in hiring results from an antiquated industry image, Szakaly said.
“It’s about educating people about what this work is like and how well compensated it is,” said Szakaly. “These aren’t bad jobs and dealers don’t need to clean things up. They just need to talk about the reality of the situation instead of allowing these old stereotypes to be there.”
For example, salespeople are now product experts and consultants who are expected to meet increased consumer demand for top customer service.
“The car is now a lifestyle choice and it’s just as much of a measure of one’s self as going clothes shopping or picking out a phone,” Szakaly said.
Sales salary slump
In 2014, the annualized turnover rate in the average car dealership’s sales department was 72 percent, an increase of six percentage points from a year earlier.
Part of that is explained by an increase in hiring millennials, generally those ages 18 to 34.
The percentage of millennials working in dealerships rose to 31 percent from 27 percent a year earlier. Close to half of all new dealership hires in 2014 were millennials. Many dealers experienced high turnover in part because of millennials taking entry-level sales jobs and deciding they didn’t like the work, Szakaly said.
Another reason for the turnover is some salespeople switched to brands with higher sales and fatter profit margins, resulting in greater compensation, Szakaly said.
Finally, “Automotive retailing is going through major industry changes, which is putting pressure on sales staff earnings,” Szakaly said.
Indeed, certain dealership jobs, such as those in fixed operations and finance and insurance, experienced greater increases in compensation than sales. That’s because profits in those areas of the dealership were stronger than car-sales profits, said Szakaly.
“Dealers have a national market now for new-car sales because of the Internet, so you see the pressure on gross profits and vehicle profit margins as everyone competes for price,” Szakaly said.
Growth in median income for key sales jobs averaged 1.8 percent compared with an average of 6.2 percent for fixed-operations jobs, which include service managers, service advisers and technicians.
Sales employees’ gains in average income also lagged other dealership jobs. The average annual compensation for a salesperson rose 3.3 percent to $68,823 while the average annual service technician compensation increased 4.8 percent to $59,181. Parts consultants saw a 6.9 percent boost to $50,935.
Those employees working at dealership groups with 10 to 40 stores outpaced the weekly earnings of those at larger dealership groups, the study found.
And those at luxury brand stores earned more than their nonluxury brand counterparts.
The average weekly pay of a salesperson at a luxury brand dealership, $1,696, was 47 percent higher than that of a salesperson at a nonluxury brand store, $1,150.
The average weekly compensation of a luxury brand service adviser, $1,528, was 33 percent more than that of a nonluxury brand service adviser, $1,146.
Only in F&I was pay comparable at $2,660 at a luxury store compared with $2,478 at a nonluxury dealership.
“There are clearly higher margins on luxury vehicles than there are on mass-market brands, across the board in sales and service work,” Szakaly said. “There is also a demand for higher customer service. How do you deliver better customer service? By paying your staff well and thereby having lower turnover.”
Dealership productivity, which is measured as monthly gross profit per employee, rose 3.4 percent to $8,410 in 2014 vs. a year earlier.
And even though employees are more expensive, “they are keeping up with that increase in labor and wage costs with productivity,” said Szakaly. “They’re doing more for more money.”
But hiring women remains challenging. Women accounted for 18.5 percent of employees on dealership payrolls in 2014, essentially flat from 2013. F&I had the highest ratio of women followed by service adviser jobs.
The reason for so few female employees is a poor industry image, Szakaly said.
“You continue to see a stereotype about this industry that it’s a male-dominated field. It doesn’t have to be that way,” Szakaly said. “Many dealers will happily hire females and they do well in many of these roles.”
Anecdotally, Szakaly said that dealers struggle to recruit “technical and mechanical” employees, too.
More dealers are responding to customer demands to open their showrooms on Sundays, Szakaly said.
The number of new-car showrooms open on Sunday increased to 41 percent in 2014 compared with 34 percent in 2012.
“That reflects increased competition. It’s the pressure on gross, the pressure on profits and demands from customers,” Szakaly said. “One demand of customer service is that you have to be open and available on Sunday.”
Over the last three years, the number of service departments open on Sunday has gradually increased. In 2012, 7 percent were open on Sunday compared with 10 percent last year.
The study is based on data collected in 2014 on national and regional dealership compensation. It examines employee retention and turnover for 60 dealership job positions and information on employee benefits, hours of operation and work schedules. It’s prepared for NADA by research firm ESI Trends, analyzing 290,000 payroll records and questionnaires dealerships complete.
Dealers who did not participate in the study may purchase a copy for $399 by calling NADA at 1-800-557-6232.