NADA study shows dealership salaries increase but turnover remains a problem

Jan. 11, 2017
Average annual compensation for employees at new car dealerships was $69,718 in 2015, a 1 percent increase over 2014. Average weekly earnings were up 1.4 percent to $1,341.

Salaries are increasing for dealership employees (particularly those on the service side of the business), but relatively high turnover is still hampering profitability as new car sales begin to flatten, according to The National Automobile Dealers Association Workforce Study (DWS).

Average annual compensation for employees at new car dealerships was $69,718 in 2015, a 1 percent increase over 2014. Average weekly earnings were up 1.4 percent to $1,341. Productivity as measured by gross profit per employee increased 0.4 percent to $8,446.

The survey is based on 2015 data from nearly 2,000 new car and truck dealerships that participated.

“Now in its fifth year, the DWS continues to show a retail-automotive industry with strong growth and earnings opportunities,” said NADA chief economist Steven Szakaly. “U.S. new-car dealerships reported improved revenues, earnings and employment across all departments.”

New in this year’s study was a compensation analysis of individual dealership employees or incumbents working in the same position in 2014 and 2015. That analysis revealed an average earnings growth rate of 6.3 percent year-over-year. General non-farm private sector earnings growth was 2.2 percent in the same period.

According to that new analysis, earnings growth in several fixed operations positions increased an average of 7.5 percent. General managers and finance and insurance managers saw double–digit earnings growth rates; sales managers and sales consultants increased 4.5 percent and 2.7 percent.

According to NADA, average compensation across all dealership positions increased at an average annual rate of 3.2 percent over the past five years, while median income growth of all positions grew at an average rate of 2.6 percent.

In 2015 parts consultants saw the biggest overall pay increase at 6.9 percent, followed by technicians (4.8 percent).

Turnover is still a problem

Overall turnover across positions at dealerships is nearly 40 percent, which continues to cause issues in several departments. Sales consultants have an extremely high rate of turnover (72 percent at non-luxury dealerships), but service also suffers from similar problems.

According to the NADA survey, service advisor turnover dropped 2 points, but is still at 39 percent. That high turnover can disrupt service department operations, require additional training for new hires, and affect productivity and profitability. Half of all advisers will leave their jobs in 2.3 years or less.

A number of factors contribute to that turnover, including:

• Long hours (an average of 45.6 hours per week) and inconvenient schedules

• Low pay and commission-based compensation systems

• Increased workloads

• Too much reliance on customer satisfaction surveys to measure performance

• Pressure to upsell customers on service work they may not need

Service advisors made an average of $64,635 last year, a 2 percent drop over 2014. The average at non-luxury dealers was $59,499; luxury dealer service advisors averaged $78,327. Dealership sales consultants average $67,846.

According to NADA, 30 percent of dealerships scheduled advisors to work more than 50 hours per week.

Dealerships tend to have high turnover in general, which can affect productivity and profitability.  Dealerships’ three-year employee retention rate for all positons fell to 45 percent in 2015. The rate in the U.S. non-farm private sector is 67 percent.

According to NADA, the dealerships that do the best job of lowering employee turnover tend to update job descriptions to improve morale; have a business development strategy for training employees; offer creative compensation packages; and provide a track for career growth.

"As more and more dealerships add flexibility to work schedules and move away from 100 percent commission pay plans to attract and retain millennials, non-luxury brand dealerships reduced sales consultant turnover by eight points,” Szakaly said.

Demographics shift

The service advisor demographics also are changing. In 2015, 17 percent of advisers were women, while 51 percent of newly hired advisers were born in 1981 or later (millennials).

“New-car dealerships are doing a better job of engaging and retaining millennials,” said Szakaly. “Sixty percent of all new hires in 2015 were millennials, up from 57 percent the previous year.”

According to NADA, millennials increased from 38 percent of the total new-car dealership workforce in 2014 to 42 percent in 2015, eight points higher than the 34 percent estimate of millennials in the entire U.S. non-farm private-sector workforce.

The ratio of women working at new-car dealerships was 18.6 percent, a slight increase in 2015. Women accounted for 20 percent of all new hires in 2015, which was the same figure reported from the previous year. Women account for only 1 percent of service technicians

Heading into the new year, NADA forecasts that U.S. new vehicle sales reached 17.4 million units in 2016, but will drop to 17.1 million in 2017.

“We are headed toward a stable market for U.S. auto sales, not a growing market,” Szakaly said. “The industry has achieved record sales, and pent up demand is effectively spent.”

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