1/11/2012 7:25 PM ET|
Should you buy a car at Costco?
You won't necessarily get the lowest price, and you'll still be purchasing the vehicle through a dealership. But if you prefer not to haggle, Costco's program has its advantages.
Americans buy virtually everything at Costco. Eyeglasses, big-screen TVs, crates of oranges, jumbo boxes of cornflakes and giant jugs of mouthwash are stacked in the company's almost 600 warehouse stores. So why not buy a couple of tons of new car there, too?
"We are a service to the members," says Gina Paolino, the president of the Costco Auto Program, which operates as a separate division of -- and vendor to -- Costco Wholesale. Because there are about 60 million Costco members in North America, that could well include virtually everyone on the continent who is considering the purchase of a new car.
Claiming more than 1 million completed new-car purchases during the past five years, the Costco Auto Program is one of the largest buying programs around. Beyond that, because there are so many Costco members, it's one of the most generally available as well.
Of course, the Costco program isn't alone out there. Similar buying programs are offered by AAA clubs and other groups, with slight or significant differences. The AAA programs can vary from club to club around the country, and some are administered by outside vendors such as the Affinity Development Group. A company called TrueCar administers purchasing programs for USAA, American Express, Overstock.com and even Consumer Reports, among others.
How the programs recruit dealers, how they're financed and what services they offer consumers differ. For instance, though many programs are financed through dealer-paid marketing fees like Costco's, others, like at least some of TrueCar's, are paid set amounts (maybe several hundred dollars) by the dealers when sales leads turn into actual sales.
At Costco, it's almost impossible to avoid seeing the new cars placed near the entrances of most of the retailer's warehouses. They're usually mainstream models -- such as Toyota Camrys, Ford Fusions, Honda Accords or Chevrolet Malibus -- covered in signs almost begging shoppers to save money with the Costco Auto Program. And for most buyers, that's what the program would do.
Still, "most buyers" is a group that may not include you.
What Costco doesn't do
To be clear: It's impossible to buy a new car through Costco itself. The franchise laws and dealership agreements the auto industry operates under mean virtually every new car sold in America at retail must go through a dealership. Costco doesn't maintain an inventory of cars, has no agreement with manufacturers to sell any cars and can't use the leverage of its massive purchasing power to buy and/or sell cars at lower prices.
But when it comes to buying a car, the Costco program does reduce the pain.
What Costco does
The Costco Auto Program is a service that pre-negotiates discounted vehicle prices with participating local dealerships and then brings that dealership and Costco members together to complete the purchase. So a Costco member buying a car this way doesn't have to negotiate on price with the dealership or deal with a salesperson. As long as the buyer knows what he wants, the new-car financing is in place, and there's no hassle over a trade-in, it's about as straightforward as a new-car purchase transaction can get.
"What you get is a protected experience," explains Phil Reed, the senior consumer advice editor for Edmunds.com, an automotive-pricing website. "And this protected experience has value. Because without it, the customer can be aggressively sold all sorts of warranties and add-ons he doesn't need or, usually, really want. What consumers hate is the unknown, and with this you get an upfront price and a protected experience."
That experience starts with a visit to the Costco Auto Program website or a phone call to its toll-free number, 1-800-755-2519. With the information in hand about what car or sort of car the buyer is seeking, Costco puts the buyer in contact with a "certified" dealership that has at least one employee trained to work with the program. The buyer then goes to that dealership, picks out a particular car, test-drives the vehicle and is shown a Costco member-only price sheet. If the buyer is satisfied, the purchase is made.
For this protected experience, the Costco Auto Program charges the new-car buyer nothing, and the retailer gets no sales commissions. The program is funded by marketing fees that dealerships pay Costco.
The Costco price
"The Costco prices are very good prices," says Edmunds.com's Reed. "For some vehicles, probably close to within $500 of the lowest price possible."
The Costco prices are determined by what Costco's Paolino calls a "pricing matrix." That matrix uses information gleaned from Kelley Blue Book, Edmunds.com and other pricing websites, along with comparable-shopping reports and other elements, to determine "pricing modules" for each dealer. There is no one nationwide Costco price, and dealers certified in the program aren't obligated to accept one another's pricing.
"It's best for mainstream brands," adds Reed, citing vehicles from carmakers such as Toyota, Ford, Hyundai, Nissan and Chevrolet. "When you decide to go to premium brands or for unusual orders or where availability is restricted, there's only so far that dealerships are willing to go."
In other words, it's easy to use the Costco program for commodity products such as the Honda Accord LX sedan, which has limited factory options and is stocked by the dozens by dealers. But Porsche dealers don't have lots full of new 911 sports cars, and 911 buyers often want to tailor their cars to their high-end tastes from the long list of options that Porsche offers.
That doesn't mean luxury brands such as BMW, Lexus, Mercedes-Benz or even Porsche don't participate in the Costco program. They do, and the Costco pricing on their machinery can be keen. But even those dealers want to move the iron that's in stock on their lots, not special-order vehicles for razor-thin profits.
"For hard-to-find things, it's almost better to go on your own," asserts Reed. Still, reports Paolino, at least one Aston Martin was bought through the program.
Getting the most from Costco
The Costco Auto Program doesn't offer much help in deciding which new car is right for you. You still need to use resources like MSN Autos, Consumer Reports and Car and Driver for research. You may also have to go to some dealerships for a few test drives, even if that means testing your resistance to pressure from salespeople to make a decision then and there. This is a big purchase, and getting it right means more than looking for the best price on a car you assume will be right for you.
If you're leasing a new car, knowing the Costco price at a dealership is also useful. After all, leases are based on the selling price of the vehicle, its predicted residual value at lease end and the price paid for it by the leasing company. Reducing the selling price will show up in the cost of the lease.
The Costco Auto Program also has some muscle with the dealers if the transaction develops problems. "We have a whole division called 'Member Advocacy,'" explains Rick Borg, the vice president of the Costco Auto Program. "We follow up with the dealer and the member to make sure things go well. We're a service to our members, and it's part of their membership at Costco."
In fact, says Costco's Paolino, the dealers certified in the program are "shadow-shopped" regularly to ensure they're performing as they promised they would. And, she adds, about a dozen or so dealers a year are expelled from the program.
"We try and correct mistakes and make sure the members got the right deal," she continues. "We try and work with the dealers through mistakes once or twice. But after that, it's time to say bye."
However, Costco doesn't offer any price guarantees. So the program's advocacy has its limits.
The best deal
About 250,000 cars were bought through Costco last year. Yet while the Costco Auto Program is huge, it doesn't necessarily cover every brand in every market. It's rare, but it may be that there are no Costco certified dealers in your area for the car you want. And it may be that the closest certified dealer is too far away.
But if you're a Costco member, using the Costco Auto Program makes sense most of the time. Even if you're a silver-tongued negotiator, having the Costco price in hand provides a good jumping-off point for the down-and-dirty of hammering out a deal.
Be honest with yourself. If you're the type of person who dreads buying a new car, then the protected experience of a Costco Auto Program transaction has true value. You still need to be aware of your financing options before going to any dealer -- always shop for the money first. You should also know the value of your trade-in and recognize that as a separate negotiation that may be unavoidable.
The best new-car prices still come from hard-core research and flinty negotiation between buyers and multiple dealers in a competitive environment. But that route isn't for everybody. Costco's price might not be the ultimate low price, but a pain-free transaction at a very good price can often be worth a couple hundred bucks.
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Wow!! This was a very big hot button of mine a few months back. Decided to buy a KIA Soul for my college graduating daughter. I hate dealerships and have used brokers over the last few years to buy cars. On a lark I decided to use Costco to buy me a car. What a DISASTER!!
They put me in touch with a KIA dealer in Boulder, CO. Which was 3 KIA dealers away in closeness but I was going to get a fair deal and that was ok. I was quoted a price on the phone per the Costco setup. I arrived at the dealership to find out the car I was quoted didn't exist in the lot. But that they had one that was very similar BUUT it had some add-ons that would increase the price.
Lucky for me I had been looking around at other dealerships and had done my online research. The first clue was a chrome gas cap add-on that was $600. All of the dealer things I thought I was avoiding by going through Costco didn't pan out. They held my license, wouldn't give it back until I physically threatened them. Were high-pressuring me to make the sale right now or 5 other people were waiting in line to purchase MY car.
Their one mistake was to give me a semi-itemized list of how they arrived at the 'new' car price. After some quick phone calls to other KIA dealers I found out that the add-on part prices could be bought straight retail at other dealerships for half or a third of the price. I figured they were trying to rip me off for at least a couple extra grand through this add-on sales tactic.
Needless to say I didn't do business with them nor did I use the Costco Auto buyer program. To be fair Costco contacted me after I complained and heavily apologized for the dealer trauma I withstood. In talking to them I realized that their dealer selection process wasn't all that great and unlike a broker they didn't live and sleep cars - after all they sell food!
So my warning to all is that you need to still do 'due diligence' and don't expect the same level of service or pricing that you might get with an actual auto broker!
I was in the market to buy a car last spring. I am not an impulse buyer, and don't give in to high pressure sales. I wasn't sure of the vehicle I wanted, but knew I wanted a mid size SUV.
I test drove many vehicles over about a months period of time before deciding on a certain vehicle. I then tried negotiating with many dealerships in my metro area.
I was very disappointed with some of the pricing, as most stayed just slightly under the sticker price, still all in the low to mid 30's. I actually thought I'd have to reevaluate my choice, and settle for a lesser vehicle. I had a budget I wanted to keep under, and wasn't about to give in to the pressure.
I then gave Costco a call and was directed to the dealership that uses the program. I was surprised by the price I was quoted, happily I should say, this vehicle was out the door under 28K, a significant savings from any earlier quotes.
Then came the trade in, I was offered an insulting value for my vehicle, about 1/2 of what KBB says it was worth retail, and about 6K plus under what the resale was worth. I think they offered me $3500 at first, and brought it up a whopping $200 (please note sarcasm) when I laughed at them.
I left the dealership (while being told I wouldn't get more than their offer anywhere else) and posted my vehicle on Craigs List that evening, it sold the next day for $6700 cash, I was very happy.
I returned to the dealership and bought my new vehicle from them with a satisfied smile knowing they weren't beating me out of about $3000.
Basically, I think the Costco program helped me get the initial fair price, lower than all of the other quotes, but they did try to make a ton of cash on my trade in. Beware of any dealership there, I don't care how low the price is for the new car, if you trade in your older vehicle, they usually make much of their bundle from you there.
If you take a little time, do some homework, and know what your vehicle worth, it's actually easy to get a fair price selling your vehicle locally. I have always listed my vehicles somewhere between retail and resale price using KBB, and all have sold within a day or two for close to my asking price.
Your car probably isn't worth what you think it is many times, but it certainly is worth much more than trade in value from a dealership, so even if you sell it for less than the cost you see it selling for on lots, it will be much more than you are usually offered for it by a dealership on trade in.
The Costco program was a useful tool in my car buying experience, it did get me the lowest quote on my new vehicle. However, it took some homework and some personal time to sell my vehicle on my own to keep those savings to a maximum.
Now that I am on the selling side of cars vs. 20 years of being a car buyer, a few words of advice...
Costco pricing is a pre-set dollar amount of savings off of MSRP per make and model. There is an official Costco letterhead with all the models listed and signed by the general sales manager and the Costco representative. Simply ask for a copy or have it emailed to you so that you know the amount of savings. It does change within the year based on supply and demand. It does not apply to acessories/packages/aftermarkets/etc., but the car does need to be in-stock. Some managers will allow the savings on an incoming vehicle.
Next, you can request actual "window stickers" of available cars that are in stock or arriving. By law (in most cases) there is an addendum attached to the vehicles showing what "accessories" have been added to the vehicle to make up the actual price of the car. Now you would know what the price is and what features the car has, nothing more, nothing less.
Obviously, in this world some dealers are better than others and some s*&tty tactics are still used. Get in contact with the sales managers to have some point of contact and do your best to find a salesperson that you can gel with. You do still need a good salesperson to help you "get to know your car" after the sale. Good luck.
First, I went to Consumer Reports online and paid $14. to get a complete printout for the 2012 Subaru Outback Limited. The printout gave detailed information on the car and any selected options, showing MSRP and Dealer Invoice price for each option and for the total price, as well as a holdback (rebate) to the dealer of 975.00. It also showed a bell shaped graph showing total cost by MSRP, Dealer invoice, and, for our Seattle area, what the average price of our car sold for. I strongly recommend that one gets this or a similar printout while planning a car purchase. Now to our experience:
We went to a local dealer before going to Costco, and he had the exact model we wanted, color and all. In our negotiations he came down to near dealer invoice, whereupon we asked if he was part of the Costco program. He sighed and said, that yes he was, and that the Costco deal was 300. below invoice. He also said that Costco had a promotion that would give us back 500. as a rebate to us. Needless to say, we took the deal, so bottom line, we got the car exclusive of sales taxes and license for 30,014 (800. below invoice), and well below the MSRP of 33,285. They even threw in a full tank of gas,which in our area is worth about 70.
So, we can highly recommend the Costco program, but also strongly recommend getting something like the Consumer Reports printout, which should insure that you have the information you need for planning purposes. Also, if you are planning to trade in your old car, be sure to get its Blue Book value so you can hold your own during any further negotiations.
Hi, my name is Jennifer and I work with the Costco Auto Program’s Member Advocacy Group. Our goal is to provide aggressive pricing and exceptional member service during the car buying experience. We actively seek members’ comments, suggestions, questions and ratings of our service. Occasionally, issues may arise while working with one of our participating dealerships and we want you to know that our team of Member Advocates are here to assist members before, during and after their transaction.
If you have used our program, or have any questions about the Costco Auto Program, please call us at (800) 556-4730. We are available weekdays from 7:00 am to 6:00 pm and weekends from 8:00 am to 4:30 pm Pacific time.
We look forwarding to speaking with you.
Member Advocacy Group
Costco Auto Program
We have attempted to purchase a car via Costco on 2 different occassions. We did the appointments as required by Costco and met with the representatives. Both times we were told that the purchase price was $200 over dealer invoice. We had previously obtained "invoice" price from Edmunds and KBB. Both times the invoice price quoted to us by the dealership was over $1000 more. We left. Bought the car somewhere else and got the car for $200 over what we knew to be the invoice (well, close enough anyway). We contacted Costco by email and advised them of the problems. We never heard anything from them.
Regardless of anything else, it was a no negotiations experience and I'll thank Costco for that, but BUYER BEWARE. Dealers still lie!
Costco is a great company. Costco is not an auto dealer. We ordered our new car thru Costco but never again. Same complaint as Denver, the car we had been quoted did not exist on the lot. Funny thing, there was a more expensive model available. I phoned Costco, got an unresponsive person who said, if you don't want it, don't buy it. We had given our car away,
to our son for collage, so we had no car. We purchased the expensive model.
NO COSTCO, NO WAY.
Used Costco past summer, although we have a dealership in our area (Hyundai) we had to go to Orlando 100 miles away. Off course the price was never quoted over the phone, so imagine my shock when the Costco discount was $250 off of the sticker price. I wasn't thrilled not only because of the discount, or the 200 mile round trip, but since no dealer has a car in stock. The closest Kia dealership for Costco is actually in Georgia.
The dealerships actually pay Costco close to $1K per month for the referrals, problem is without inventory you will never be able to get a true price on any cars until they are in the lot. This has been our experience with purchasing a new car, and forget truevalue, kelly, etc.. pricing.
Sure, you're almost guaranteed more money by selling your car yourself. That's only if you take the time and effort to do it yourself.
I love it when people spout off in comments sections and say things that even the simplest Google search can show to be untrue.
P.S. If you are a Camry/Accord owner, you are doing yourself a disservice not test driving the newest America has to offer.
Badass94Cad - Yes, I understand you don't get resale value for a trade in, and I didn't say you should.
The resale on my vehicle was between 10 -12K, (the internet is a wonderful tool) even if they were to sell it at auction, it would have gone for $6500 (I have a friend who owns a Used Car lot, he buys from auctions all the time).
My point, the dealer offered me $3500 on a car that would be resold for about $10,000 +, I didn't expect nor say that's what I wanted, but a fair price would have been nice.
And yes, it took about 3 hours of my time to sell the vehicle on my own, (took some photo's, posted it on Craigs List, took a few calls, had 2 people set appointments, second guy bought it on the spot).
I asked a very fair price, it sold quickly, and in my eyes, in the extra 3 hours , that's $1000 per hour I made. Not a bad rate if you ask me.
I've sold a few vehicles this way, normally a dealer or shop buys them at the price I ask. I make more than the trade in, the guy who buys it resells it for profit, everybody but the new car dealer is happy.
The Costco program also saved me a bunch of money. So basically, I'm one of the happy people with the program, and offered my advice to others who don't like getting raped by the dealership even when using the program.
I would do it again..........
EducatedinMI needs to get an education!!!!!!!!!!! Fords and Chevys are made in Mexico and Toyota and Honda are made in the USA. So based on your education Costco should only sell Toyota and Honda and the Ford and Chevys should be deported. Get your facts before you speak. So there....
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