On the Dash:
- Paying base commissions can encourage salespeople to report suspicious customers instead of pushing questionable deals through.
- Auto finance faced an estimated $10.4 billion in fraud risk in 2025, up 13% year over year.
- Dealers increasingly use compensation structures to encourage due diligence and reduce costly lender chargebacks.
Cherokee Mitsubishi, located in Canton, Georgia, has implemented a policy that pays employees their base commission even when they flag questionable customers, according to Automotive News. This means salespeople can alert a manager about suspicious activity without risking their $125 base commission.
Jonathan Dawson, Dealer Principal at Cherokee Mitsubishi and host of CBT News’ Mind Your Own Business, explained that the policy aims to motivate salespeople to report red flags without risking their income. Usually, salespeople are driven to close deals, which might tempt them to ignore suspicious transactions. Therefore, Cherokee Mitsubishi addresses this issue by guaranteeing their base commission no matter the results.
While auto finance is becoming a bigger and more expensive risk for dealers, Point Predictive estimates that the auto finance industry faced $10.4 billion in fraud risk in 2025, up 13% from 2024 and 79% from a decade ago. Notably, when financed customers default due to fraud, lenders can seek refunds from the dealerships involved, and a single fraudulent transaction can cost a dealership tens of thousands of dollars.
Many dealership pay plans include clawbacks, making finance managers financially responsible for fraudulent transactions that result in lender chargebacks. In some cases, dealers penalize all parties involved, and certain dealerships have incorporated termination clauses for employees associated with recurring chargebacks. The purpose is to emphasize quality over the quantity of deals.
However, Cherokee Mitsubishi has taken a different approach. According to Dawson, the dealership does not penalize employees for fraud-related chargebacks and hasn’t experienced any such chargebacks. Common red flags include suspected straw buyers and questionable customer documentation. Dawson adds that employees at Cherokee Mitsubishi instead receive rewards for stopping questionable deals before they close, shifting fraud prevention from a compliance burden to an integral part of the sales process.
