What Is a Split Deal? Inside How Car Sales Commissions Really Work

A real dealership story reveals how salespeople get paid and how deals get messy when more than one person is involved.

One day I sat down at my computer, opened my customer relationship management system (CRM) that contains all my prospects’ information, and started looking for people I hadn’t spoken to recently. That’s when I saw Sylvene’s name.

Sylvene had called in about a month ago, asking about a pre-owned Malibu. I talked to her a few times, and she seemed genuinely interested, but told me she was waiting for some money she was expecting and would come in when she got it and buy the car. It had been almost a week since I last spoke to her, so I gave her a call. The conversation went like this:

“Hi, Mrs. Smith, this is Mark at Wile E. Coyote Chevrolet. How’re you doing?”

“Just fine, how about you?”

“Great! I was just thinking about you and wondering if you’d like to come in sometime this week and look at that silver Malibu.”

There was a pause on the other end.

“But I already bought it,” Sylvene said, sounding confused.

I thought I didn’t hear her correctly. “Oh, you bought a car somewhere else?”

“No, I bought it there, at your dealership.”

Now it was my turn to sound confused. “You bought it here? From whom?”

There was an even longer pause on the other end. “Well ... from you.”

It suddenly hit me what happened. I’d been “skated.” Another salesperson had sold her the car and didn’t tell me.

“Sylvene, this is going to sound like a strange question, but can you describe me? What do I look like?”

Sylvene then described another salesman, a salesman who just coincidentally had a last name very similar to mine: Jim MacDonald. With a Mac, not a Mc.

What “Getting Skated” Really Means

Then she told me what happened when she arrived at the dealership. She didn’t know it, but the day she picked to come in was my day off. When a salesman approached her, she said she was there to see a “Mr. McDonald.”

“I’m Mr. MacDonald,” the imposter replied.

When Sylvene figured out what had happened, she couldn’t stop apologizing. She felt terrible that I wouldn’t get any “credit” for the deal and expressed anger at the other salesperson for lying to her. I told her not to worry about it and wished her well.

The old saying that there’s no honor among thieves is true. Well, among some thieves, anyway. But that’s not the way it’s supposed to work. Most dealerships have a system to handle these kinds of situations. It’s called the “split deal.” But to explain what a split deal is, first I must explain how salespeople are paid.

How Car Salespeople Actually Get Paid

In the car business, salespeople aren’t paid an hourly wage or a salary in the traditional sense. Most are paid on a commission basis. There are a few dealerships that work a little differently, like CarMax, but they’re the exception, not the rule.

Commissions are usually based on a combination of things, the main one being the gross profit in the deal. For example, if the dealership makes $2,000 on a particular sale, the salesperson is paid a percentage of that, say 20 percent, and 20 percent of $2,000 is $400. If you made $400 on 11 cars, which is the number of cars the average salesperson sells every month, you’d make $4,400 a month, or $52,800 a year before taxes.

Depending on the pay plan, salespeople can make a lot more than that, or a lot less. Many dealerships have a stair-stepped pay plan, in which the more you sell, the more you make. For example, once you sell a certain number of cars, say eight, your percentage might go up from 20 to 22 percent. Once you hit 15, it might go up again, to 30 percent. And so on. Some dealerships also include backend products. If the finance department makes money on the financing or selling things like a tire and wheel protection package, the salesperson might get 5 percent of that. It all adds up.

But what happens if the dealership loses money on a car deal?

This happens more often than you think. If a deal makes a negative $1,875, the dealership can’t take money away from the salesperson—although I’m sure there’s a dealer somewhere that’s tried. Instead, there’s a minimum commission, or a “mini deal,” which might be $300. If every car you sold was a mini, you’d end up at $3,300 a month, or $39,600 a year before taxes. This, believe it or not, is close to what the average car salesperson makes per year in the United States. The superstars that make—or claim they make—hundreds of thousands a year are a rarity.

The point of the commission system is to make you hungry. You can either starve to death on $3,300 a month, or you can go out there and “tear some heads off,” as we like to say in the car business, which means to make a huge profit on a deal. If you can’t sell cars, you may not be able to pay the mortgage and end up homeless.

But, hey, no pressure.

When One Deal Turns Into a Fight

Now that you understand how salespeople are paid, how does it work when two or more salespeople help the same customer?

The way it’s supposed to work is like this: Let’s say Mr. Smith comes to the dealership on Saturday, and Lavonte takes him on a test drive of the new Zorch Super Condor. Mr. Smith likes it but doesn’t buy it that day, for whatever reason. A week or so later, he comes back, this time on a Tuesday, which is Lavonte’s day off, and is “upped,” or greeted, by a different salesperson, Brad. Brad closes the deal, and Mr. Smith drives home in a brand-new Zorch. The commission for that sale is then split 50/50 between Lavonte and Brad.

Simple, right?

Well, no. Things are never that simple in car sales. Suppose Lavonte gets busy on Saturday and forgets to log Mr. Smith’s visit to the showroom. There is now no record in the CRM that shows Lavonte ever worked with Mr. Smith. When Brad greets Mr. Smith on Tuesday, he looks in the system and doesn’t see Lavonte’s name. And the customer never mentions Lavonte. So, Brad puts the customer in his own name and gets paid the whole commission. When Lavonte finds out that Brad sold “his” customer, one of three things is going to happen:

• The salespeople talk to each other and work it out like adults
• Management gets involved and sorts it out
• Lavonte takes Brad out back and kicks his ass

Then there’s the last potential scenario, one where another salesperson says, “Hey, wait a minute! I talked to Mr. Smith’s wife the week before and set an appointment for her on Saturday. And I put her in the CRM. I should get half that deal!” Now management must figure out who to cut out of the deal, because a three-way split is too complicated. No matter what the decision, the end result is going to be hurt feelings (and a smaller paycheck) for one of the three people involved.

That’s why some dealerships simply don’t do split deals. It’s just too many headaches. It’s a nightmare for accounting, sorting things out takes time away from selling cars, and in the end, no one is satisfied. At least, that’s the argument.

What can you, as a customer, do to help this situation? Well, first of all, understand that you’re not obligated to work with any particular salesperson. If you’re unhappy with them for any reason—even if it’s just that they reek of cigarette smoke—you have a right to ask for a different salesperson. Don’t be shy, just ask to speak to a sales manager and tell her or him you’d like to work with someone else. They’ll appreciate the fact you stuck around and didn’t just walk out the door, which is also your right.

But if you like your salesperson and think they’re doing a good job, show them some love. Be loyal. They’ll appreciate it and work even harder for you. And their families will thank you.