- The Costco Auto Program allows Costco members to buy discounted cars through participating dealerships.
- The program makes a lot of the hardest parts of buying a car – like research and negotiation – easier.
- But it also limits the customer’s choices in some areas.
Shopping for a car can be overwhelming.
If you know you’re looking for, say, an SUV, you have to determine the brand, the model, and the model year you’d like, as well as the dealership you want to use, whether you’d like to buy new or used, and whether you want to buy or lease.
Where do you start your research? Which sources can you trust? What’s a reasonable price for a given model?
The Costco Auto Program attempts to eliminate some of that uncertainty.
In the past five years, over 1 million Costco members have purchased a vehicle through the program, which allows members to research and compare vehicles, calculate monthly payments, and get a discount at participating dealerships through the program’s website or call center.
While the size of the discount varies based on the vehicle’s class, brand, and model, a Costco Auto Program representative told Business Insider that the average was over $1,000 off a vehicle’s average transaction price.
And since the program is available only to its members, Costco has plenty of reasons to vet dealers and salespeople so their customers don’t end up feeling tricked – and blaming Costco.
“We’re not just providing leads to dealers – we’re creating a referral,” Rick Borg, a Costco Auto Program senior executive, told Business Insider.
Here’s how using the Costco Auto Program is different from the average car shopping process.
1. You have to be a Costco member to use the auto program.
This may sound obvious, but while nonmembers can use some of the program’s research tools, only Costco members are eligible to get the discounted price.
2. Multiple strands of research are condensed into one place.
- Costco Auto Program
One of the most difficult parts of shopping for a car is figuring out where to start and end your research, especially if you don’t read auto news and reviews for fun.
The Costco Auto Program brings reviews, safety ratings, a financial calculator, and a vehicle-comparison tool under one roof.
While it never hurts to compare research from multiple sources, the program’s website provides a good place to start.
3. Your choice of dealerships and salespeople is limited.
Borg says Costco works with one dealership per brand in a defined geographic area around a Costco warehouse – and at each participating dealership, only a handful of salespeople are authorized to work with customers shopping through the program.
He says Costco picks dealerships based on prices, customer satisfaction index scores, and reputations on social media. Authorized salespeople are also evaluated based on their CSI scores and must work at their dealership for at least six months before they are eligible to work with the program.
But the limited number of dealerships and salespeople makes things a little more difficult for customers who don’t end up satisfied with the first dealership Costco recommends. While Borg says Costco can point customers to other participating dealerships, they may not be geographically convenient.
4. Costco has already negotiated the price.
Negotiating the price of a car can be intimidating. While the dealership has much of the information – inventory, the dealership or salesperson’s proximity to their sales goals, the average discount customers receive – you want to get the lowest possible price.
Borg says Costco takes a holistic approach when negotiating prices with participating dealerships, looking at national and local prices for a model as well as what customers can find through other discount programs to determine the discount its members should receive.
And since it has a large membership base it can funnel to selected dealers, it has more leverage than any individual shopper.
5. You have a multibillion-dollar company behind you that can help resolve disputes.
If Costco’s incredibly generous return policy is any indication, it will bend over backward to retain its members.
Buying a car is a much bigger investment than a grocery trip, and the company doesn’t want its members to associate it with a $40,000 purchase they regret.
Borg says that while the company is “fairly selective” about which dealers it works with, it also provides customer support before and after a purchase.
If, for example, a customer finds a scratch on their car immediately after buying it and it falls outside their warranty, Costco can at least serve as a mediator between the customer and dealership.
“Are we going to advocate for members? Absolutely,” Borg said.
He added that if a dealership were concerned about who would be responsible for cosmetic damage like that, Costco is “certainly going to step in and have a conversation with the dealer and ask them to do the right thing.”