Used Car Dealership Employment Agreement

What a good one includes

• A precise description of the employee's role, specifying whether they are in sales, F&I, or service, alongside their daily responsibilities regarding inventory management and customer service.
• A comprehensive breakdown of how commissions, draw-against-commissions, pack fees, and monthly unit bonuses are calculated and paid.
• Clear rules governing what happens to paid commissions if a vehicle sale is unwound, a finance contract is charged back, or a customer defaults early.
• Explicitly defined work hours, including weekend and holiday expectations, with clear guidelines on overtime eligibility in compliance with federal and state labor laws.
• Protections safeguarding your dealership's customer databases, lead lists, proprietary pricing strategies, and local vendor relationships from being taken to competitors.
• A structured outline of the notice periods, grounds for immediate termination, and how final commissions or pending deals will be calculated upon departure.

Common mistakes to avoid

• Failing to define exactly when a commission is "earned" (such as at delivery, funding, or signing) which often leads to intense disputes when an employee leaves the dealership.
• Relying on generic templates that misclassify dealership salespeople as exempt from overtime without verifying that they meet specific state and federal retail commission exemptions.
• Forgetting to detail how finance or warranty chargebacks affect a salesperson's or F&I manager's pay, leaving the dealership to absorb those losses.
• Neglecting to write down clear rules, insurance responsibilities, and tax implications regarding an employee's personal use of dealership demo vehicles.

Frequently asked questions