Sales Force Turnover Drops at Car Dealers in 2006

Drop continues a general 20-year trend

By Brendan Moore

08.27.2007

The average turnover rate at new-car dealerships in the United States has dropped from 48% in 2005 to 42% in 2006, according to the folks at NADA (National Automobile Dealers Association).

Just by way of comparison, the (voluntary) turnover rate across all jobs in the U.S. is about 23% nationwide.

The average turnover rate among salespeople has dropped dramatically if viewed over the last 20 years, even though there are sometimes there are increases or plateaus in certain years. The average sales personnel turnover at franchised dealers has been as high as 85% in the past. If you were buying new cars 20 years ago, you can probably attest to the high turnover rate among salespeople – it was not unusual to go to a high-volume dealership six months after visiting the first time, and not seeing anyone you recognized on the showroom floor during the second visit.

Paul Taylor, NADA chief economist, says that dealership sales force turnover tends to decrease as overall sales slow down, with more people staying put wherever they’re at since the grass doesn’t necessarily look greener at another dealership in times of overall auto industry sales declines. Auto sales in 2006 fell 2.6% from 2005 sales figures.

The NADA also says that larger dealerships tend to have lower churn rates among their salespeople than small dealerships because they can keep salespeople happier in down sales cycles by simply spending more marketing money.

The NADA says that American new-car dealers spent a combined $7.8 billion (USD) in 2006. That’s the advertising the dealers paid for; it is exclusive of the money the manufacturers spent on brand and model advertising nationally. The NADA says that’s a 2% increase from 2005 and represents an average $590 advertising cost borne by the dealer per new car sold. The average new-car dealership in the U.S. spends $364,610 on advertising for their new car sales department. A large dealership in a major metro area might spend easily spend over a million dollars in the same 12-month period.

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Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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3 Comments

  1. Just a comment or two. Turnover at a dealer (in the salesforce) tends to be bimodal: if 10 people on hand 3 have been there since 1975 and the other 7 churn rapidly. The 3 have their Rolodexes of old customers and so are set. The 7 try to “stand in front of a hot car” as it were: do your time at a Ford dealership long enough and maybe you can snag a spot at Nirvana (a Honda store): since the customers nowadays tend to know more about the car than the salesman the salesman just wants to be around easy-to-sell cars. Fun but bizarre fact: in 1975 a typical car salesman sold 10 a month. In 2005, 10 a month. Fascinating that in all this time productivity growth is zilch. Since it takes about 3 hours to close a deal a salesman today might have 30 productive hours out of a working month of 200. Part of the problem is surges in buyers: one needs to have plenty of people on hand for the Saturday rush, but then you’ve got guys reading the paper all of Tuesday…

  2. Glenn is right, although the situation he describes is more likely at a small dealership where the salesperson has a good personal relationship with the dealer principal or the dealership management. That why it made me laugh to see the higher turnover at a small dealership comment. True overall, but the the people that do stay at the smaller dealerships stay a very long time, much longer than the ones at large dealerships, and, they’re happier, at least in my experience.

    What Gleen says about sitting around is true as well – before the internet there were endless rounds of liar’s poker, and no that the internet is available in most dealerships, lots of net surfing during the day. Like right now…

  3. Ahhh, liars poker. Good times.

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