Costco Wholesale Corp (COST), the warehouse store that everyone either loves or loves to hate, has a secret. Costco members can buy cars through a little known program called the Costco Auto Program.
- Costco offers its members discounts on new and pre-owned car purchases through an affiliate network of carmakers and dealerships.
- The idea is to offer car buyers a haggle-free experience while also getting preferred pricing.
- Despite its benefits, some people who do not wish to purchase a Costco membership have reported receiving the same or better deals when negotiating for a car on their own.
The program works like this: Costco has partnered up with all the major car manufacturers across the country to work out the best pricing for its members. Dealer and car salesmen are trained by Costco to become Authorized Dealer Contacts and can then sell cars to Costco members at the agreed upon price. While Costco isn’t selling the cars directly, they’ve done all the haggling for a one-stop shopping experience on most cars for sale.
Costco members in the market for a new car need to remember one important fact: they must find their dealer through the Costco Auto Program. Stories abound on the Internet of consumers calling dealerships directly and being assured that the salesmen were authorized dealers, only to be bait-and-switched when the customer arrived to purchase a car. Going directly to a dealer is a costly mistake for Costco members.
By using the Costco Auto Program, Costco members get the benefit of Costco’s Member Advocacy Group: a customer service body to which members can complain if the dealership isn’t treating them fairly.
Since Costco’s car sales are actually sales through a dealership, all national sales promotions and manufacturer incentives are considered when establishing the price. Members can also enter into lease agreements with their Costco Authorized Dealer, as well as trade-in their old vehicle for credit. Despite its name, the Auto Program isn’t limited to new automobiles. Members can also purchase used cars, motorcycles, ATVs, scooters, and snowmobiles at prices previously haggled by Costco employees.
Because the prices are standardized for all Costco members, there’s no need for the car salesman to be pushy or for the consumer to feel intimidated. Instead, Costco has created a program that allows for a comfortable, non-confrontational shopping experience.
The Side Effects
The program is obviously not without its drawbacks. Customers who are great hagglers have reported online that they were able to get an equivalent or better price than what was offered. Members should also beware of dealers who are looking to make a bit more than the tiny margins that Costco offers by selling complementary or accessory products or by trying to up-sell the shopper on a different vehicle.
Perhaps the most inconvenient factor of all is that Costco’s Authorized Dealers cannot reveal prices over the phone. For members who live near an authorized dealer, this isn’t a problem because the customer can easily go to a dealership, have a coffee and learn the prices. Customers who must travel long distances to get to an Authorized Dealer are either less likely to make the journey or more likely to make a purchase since they’ve traveled all that way.
All members can take advantage of Costco’s Auto Program Service Centers. In areas where the local Costco doesn’t have a service center, Costco has teamed up with Authorized Dealers to provide a 15% discount on services (excluding oil changes). A member who buys a used car through Costco’s Auto Program sees a one-time coupon for 50% off at an Authorized Dealer Service Center. The prices set at Authorized Dealers are not negotiated through Costco and so buyers should also beware when bringing their vehicle to a Service Center.
The Bottom Line
Costco’s Auto Program is a great idea for shoppers who are too nervous, too ill-experienced, or too busy to negotiate on a new car price. For only the cost of a membership, Costco members get a set price pre-negotiated by Costco. At the very least, all consumers should visit an Authorized Dealer at the beginning of their search for a new vehicle.
For those thinking of utilizing this program and taking out a loan to finance their vehicle purchase, it's worth experimenting with an auto loan calculator to ensure you're getting the best loan term and interest rate to suit your needs.