The Costco Auto Program is a popular way to buy cars in the U.S. (and Puerto Rico), with Costco members making over 520,000 vehicle purchases through the program in 2017.
But is the program worth it? Before signing up for a Costco membership to snag a better deal on a new car, it's a good idea to learn how the Costco Auto Program works so you can weigh the pros and cons of using it.
How Costco's Auto Program Works
The Costco Auto Program connects Costco members to participating dealerships that offer reduced prices on new vehicles. To use it, members call a Costco service center or plug their preferred vehicle into the CostcoAuto.com directory— including details such as the make, model and model year — and select the car. Costco then finds a local dealer that offers the car at a reduced price and sends the customer the dealer's contact information.
Although a Costco call center can help you arrange a purchase directly, the online directory lets you compare reviews and figure out monthly payments as well, so it may provide a more thorough buying experience overall.
Costco doesn't receive a cut of the sales. Instead, dealers each pay Costco a monthly fee to participate in the program and enjoy the large customer base that Costco can direct their way. Because of this arrangement, Costco isn't loyal to any particular dealer, ensuring there's no conflict of interest over its price listings.
Costco trains employees at each participating dealership to interact with referred customers. Certified as Authorized Dealer Contacts, these employees are expected to commit to Costco's price agreement and make customers feel relaxed. They're also tested randomly by Costco employees disguised as shoppers. Dealerships that fail to represent Costco adequately can be booted from the program.
The Benefits of the Costco Auto Buying Program
Many people find this program helpful, as the Costco price is fixed and no-haggle, meaning you don't have to negotiate with dealers on the spot. Consumers also like the quality of dealers that participate in the Costco program; they usually provide a higher level of service in order to maintain their reputation and participation in the program.
In addition, the listings in the directory show the invoice price for each car — that is, the price the dealer paid the manufacturer for the vehicle — and the manufacturer's suggested retail price, or MSRP, which reflects how much the manufacturer thinks the dealer should price the car. This openness about each vehicle's value makes the program especially appealing to jaded car buyers.
As of 2019, the MSRP for vehicles in this program have ranged from less than $20,000 to over $150,000. If you want, you can agree to let Costco check your purchase agreement to make sure you received the agreed-upon price for your purchase.
On top of the overall vehicle discount, buyers through this program often get discounts on accessories and services relating to the car, such as oil changes.
Another benefit of the program is its range of options. While the Costco Auto Program offers access to thousands of standard cars, sedans, trucks and SUVs from numerous makes, such as Ford and Honda, you can also buy powersports products — such as RVs, ATVs, UTVs and jet skis — and mobility vehicles.
Members can also buy used cars that have undergone thorough inspections and repairs.
If the price for a vehicle is a little steep, even after the discount, you can lease your preferred vehicle instead of purchasing it. To sweeten the deal, the reduced Costco pricing includes factory add-ons, and Costco members are eligible for manufacturer rebates as well. Costco lists all the special financing offers available at dealerships, helping you pick the best individual transaction for you. Finally, you can personalize the vehicle's trim and color as you like.
The Drawbacks of the Costco Car Buying Program
One of the biggest drawbacks to this program is that you must be a paying member of Costco to use it. As of 2019, a Costco Gold Star membership costs $60, while a Gold Star Executive membership costs $120. Also, you can't find out how large your discount is unless you visit the dealership, which has a Costco Member-Only price sheet for each vehicle.
Although the average discount through the Costco Auto Program is $1,000, this number can vary quite a bit, so you may end up visiting a dealer only to get a disappointing offer.
There's no guarantee the dealer is going to have your car on hand when you arrive. If this happens, you can ask the dealer to order the car from the manufacturer or another dealership, but you may have to wait a while before it shows up on the lot. Keep in mind, too, that you can use the discount price the dealer offers to haggle with other dealers.
Another drawback to the program is that, while its prices are solid, it rarely offers the best price you can find. After all, Costco can't control the price that dealerships list for each car before applying the discount, so dealers can easily adjust the original price to make the discounts less damaging to their profits. Plus, nothing beats good old-fashioned negotiation. If you research dealers and vehicles in depth, shopping around and comparing prices until you find the perfect deal, you can potentially save hundreds or even thousands more dollars than Costco Auto can offer. Remember: If you find group-buying discounts promising, you don't have to join this one program. Many banks have group auto-buying programs, and both the United States Automobile Association and the Affinity Auto Program have helped millions of people get cars at a discount.
According to Costco, about 43 percent of dealership visits through the Costco Auto Program result in a purchase. Some customers trade in their old vehicles for a credit toward their new one, making the final price even lower. Costco also monitors their discount services carefully to ensure they're competitive, so you're likely to drive off the lot happy.
All in all, the program has a lot going for it. If you're not sold, however, you should take a look at some of the research tools on CostcoAuto.com to learn more about your options. These tools include a vehicle comparison module, which lets you compare the features of two or three vehicles side-by-side, and an expert assessment of your preferred vehicle's performance record. For any vehicle, you can also access a safety evaluation for it, a list of manufacturer incentives and rebates, a finance calculator to calculate your monthly payments and a comparison of whether you should lease or buy the vehicle. Costco even provides a Member Advocacy Group to answer members' questions and help them get the best deals, and they periodically offer coupons and limited-time sales events to boost members' savings as well.
Whether you should join the Costco Auto Program depends on whether you feel becoming a Costco member is worth it, how much you dislike haggling and whether you think Costco's discounts are good enough to justify skipping the research that could net you a better deal.
Buying a new car is expensive and paying $60 for a Costco membership is small amount in comparison to the price of a new car. Even if you don't buy the car, you'll be getting a very competitive quote from a dealer that will help inform your future negotiations. If you're still not sure whether to use the program, try reading some reviews of it, and talk to a representative of the Member Advocacy Group.