Purchasing a car through Costco might sound a little funny—buying a car from the same place you get your bulk pretzels?
Costco car buying doesn’t mean buying a vehicle from Costco but rather through Costco. “The Costco Auto Program is just a streamlined and maybe more confident-feeling process for buying a car,” says Karl Brauer, executive analyst at automotive-research firm iSeeCars.com. We asked Brauer to explain the Costco car-buying service…why it can be a good idea…and what to watch out for when using it.
What Is the Costco Auto Program?
“Like other programs out there,” Brauer says, “this is a referral program. It gives Costco members access to a network of more than 3,000 dealers to purchase a vehicle at a price that is a good deal.”
If you’re looking for a particular year, make and model of car, you can find out if Costco has vetted and engaged with a dealer in your area that currently has that specific vehicle in inventory. When dealers sign onto Costco’s network, they agree to offer their cars at low, prearranged pricing. “At least in theory,” says Brauer, “you’re not going to have to play games to work out a price. A lot of people hate buying cars, so that promise is enough to make them very interested.”
How Does Costco Car Buying Work?
The process for getting Costco car deals varies slightly depending on whether you’re buying a new or a used vehicle.
New-car buyers can start by visiting Costco’s vehicle-research page to educate themselves about which vehicles are available. Once you’ve selected a vehicle you’re interested in, you complete a form indicating the car, your location and your Costco membership information. This information is passed along to a local dealer who will contact you to make an appointment to visit the showroom. There, you’ll get to test-drive the car and will be shown its Costco member-only pricing.
Used-car buyers can begin by using Costco’s inventory search tool. When you’ve found a vehicle you like, you view the dealership’s information and click to schedule an appointment. The dealer reaches out with member pricing and invites you to test-drive the car. For a factory-certified pre-owned car, there is a separate tool to connect with dealers.
Costco vets its member dealerships to ensure competitive pricing and high customer satisfaction. It also requires these dealers to train staff to provide a low-pressure transaction process for Costco members. But once a buyer is matched with dealer, they’re on their own. That means it’s up to you to handle financing and arrive at the ultimate price after incentives, add-ons and other factors. While the promise of a single price can be appealing to some buyers, buyers can still ask for a lower price or request Costco meet a lower price at a competitive, non-Costco dealership.
Key Benefits for Costco Members
There are good reasons to choose Costco car buying vs. dealership-direct. Brauer says, “Why do people ordinarily shop at Costco? Because they can get things for less money than they would pay otherwise.” Those Costco car-buying savings are the Costco Auto Program’s main benefit.
When you add in the fact that the participating dealerships have been vetted and the pricing is already in place, the Costco Auto Program becomes even more attractive. “If the price the dealership offers is as good as or better than the vehicle’s market value, then boom…you’ve just won,” Brauer says. “And you didn’t have to fight to get that price.”
The Costco Auto Program also provides a few less well-known perks. Besides vetting dealerships, Costco maintains relationships with service centers that meet its criteria for customer satisfaction. You can sign up to save 15% on parts, service and accessories for a garage in your area.
Also, if you’re in the market for an RV, Costco’s purchasing program lets you buy at a member discount through a Camping World dealership. You can shop for anything from a pop-up camper to a class A motorhome through the program.
How Much Can You Save?
According to Kiplinger, Costco member car discounts are typically around $1,000. But if you’re lucky, you can take advantage of special Costco car-buying incentives, such as its Limited-Time Specials, which can knock substantially more off the car price. Recent example: Costco offered an incentive of $1,250 for Executive Members or $1,000 for Gold Star and Business members who purchase a Chevrolet Bolt.
“You can also stack incentives,” Brauer says. “The federal government no longer offers a tax credit for electric vehicles, but some states still do.” Theoretically, by the time you figure in member pricing, the Limited-Time Special, a state tax credit and possibly a manufacturer incentive, you could be talking about significant savings.
Pros and Cons of the Costco Auto Program
As with any method of purchasing a vehicle, there are Costco car-buying pros and cons. The possible advantages of purchasing through Costco are clear. But keep in mind, you may not have a Costco-participating dealer convenient to your home, and even if you do, it may not offer the vehicle you’re most interested in.
More importantly, he says, “You always need to be on guard when you’re dealing with car sales. The price may have been prearranged, but I doubt Costco has made these dealerships promise not to try to sell you anything besides the car.” That means you might have to say no to things such as stain-proofing the seats, adding in nitrogen-filled tires and so on—all of which could drive the price back up.
Tips to Maximize Your Savings
“The promise of the Costco car-buying program is less work for you,” Brauer says. “But don’t let that turn into paying too much because you didn’t bother checking anything and assumed the program was going to save you money.” Strategies to get the best price…
Know the vehicle’s market value
Your first step should always be to learn the value of the vehicle you’re interested in. Visit a site like iSeeCars.com or kbb.com and search the vehicle’s value in your zip code. If the Costco price doesn’t match or beat it after stacking incentives, there’s no reason to use the program.
Line up your financing
Similarly, Brauer urges, “Don’t just accept the dealer’s financing.” Go to your bank or credit union, and set up financing before you ever set foot in the dealership. If the dealer won’t match their terms, get your financing elsewhere.
Beware dealer add-ons that can drive up prices
“Imagine a high-demand vehicle with a manufacturer suggested retail price (MSRP) of $35,000,” Brauer explains. “The dealer would rather sell that car for $42,000. So they spend $2,000 adding things like an alarm or fancy wheels, and get that price up to $42,000, for a profit of $5,000.” When you’re researching the inventory, verify that what you’re seeing doesn’t include a bunch of unwanted add-ons.
Who Should Use the Costco Auto Program?
“Anyone who has got access should use the Costco auto program as one of their tests on getting a good deal,” Brauer says. “Your thinking should be, I’m going to give the Costco program a try after I’ve done research to confirm what I can get this car for without Costco’s help and after I’ve got my financing lined up independently. You’d be foolish not to do it.”
