Should You Buy A Car Through Costco? Here's What The Auto Program Actually Offers

Yahoo

3 days ago

Americans have a serious love affair with Costco. It's the third-largest retailer on the planet behind Walmart and Amazon, according to a 2024 report from Statista. Where else can you buy a $5 rotisserie chicken alongside items like a one-ounce gold bar, a 72-pound wheel of parmesan cheese, or a cheap, but rather attractive funeral casket for your dearly departed?
Costco sells products for your car, too, like discounted tires, batteries, and the company's signature Kirkland brand motor oil. But did you know that you can purchase an entire car from the discount warehouse club? Well, sort of. Since 1989, the Costco Auto Program has been available to purportedly score club members a great deal on new or even used cars.
To be clear, you're not actually buying a vehicle through Costco, but instead, through one of its network of approximately 3,000 dealerships, which have been vetted and specially trained to interact with Costco customers.
Read more: These Are What You Wanted As First Cars (And What You Got Instead)
Prices Are Pre-Negotiated
Like most car-buying experiences nowadays, the process of buying a car using Costco's connections begins on the Auto Program's website. Once a suitable vehicle has been identified, a pre-negotiated price can be obtained from participating dealerships. That price potentially includes exclusive discounts that are only available to Costco members due to the high volume of business that the warehouse club funnels to car manufacturers and dealerships. Obviously, the allure of this system is that car buyers receive a lower price than the general public without the need to haggle.
If Costco discovers that a dealership inflates the price or added mandatory fees that vary from its price agreement, it can be barred from participating in the program. Note that while Costco's website does provide advice and calculators to figure out monthly payments and how much car you can afford to purchase, it doesn't actually offer financing. Auto loan rates are relatively high as of this writing, but dealers are free to hike those rates even more for additional revenue, which is a profit point that's outside of Costco's jurisdiction.
As with any financed car purchase, shoppers are well advised to do some research ahead of time as to what type of interest rates and terms are available through local banks and credit unions, as well as online. That way, buyers can confirm that the loan terms offered by the dealership's finance department are fair.
Salespeople Are Held To A High Standard
An additional grey area of Costco's Auto Program exists if the buyer has a vehicle to trade in against their new car. Like obtaining financing, the trade-in value won't be discovered until the Costco member visits or speaks with the salesperson further along in the car-buying process. It'll pay to get quotes from sources like CarMax, Carvana, and others to make sure that a fair trade-in value is being proffered. By this point, it should be clear that buying a car using Costco's system isn't quite as easy as visiting a website and completing the process online.
You'll definitely interact with a salesperson, which the warehouse club calls "Authorized Dealer Contacts." Not just any salesperson is qualified to transact with Costco members, either. They're required to have been employed at the dealership for a minimum of six months and maintain high customer satisfaction scores. Reportedly, Costco occasionally deploys its employees posing as car buyers to make sure that these high standards are being met.
As a whole, the dealerships that Costco accepts to participate in its car-buying program are held to similarly high standards as its salespeople. For example, Costco typically only works with a single well-vetted dealership for each brand in the geographical area of its warehouse stores. That's regardless of whether there are other competing dealers nearby. Moreover, Costco has been known to leverage the purchasing power of its large membership base to negotiate favorable outcomes for its customers in the event that a dispute arises with participating dealerships, even after purchase.
Aggressive Negotiators Can Do Better
So now that you know the benefits, is it worth purchasing a vehicle using Costco's Auto Program? To begin, you'll need a Costco membership card at a cost of $65 per year, and shockingly, it's not even accepted by the TSA as valid ID. Beyond that, we think it comes down to how much time you're able to dedicate to research, as well as your personal comfort level and experience when it comes to haggling.
Costco uses its considerable largess to negotiate discounts with local car dealerships for its members. Additionally, it ensures that the dealership employees who interact with its members are of a high caliber. That said, there are still some aspects of the process that are open to the conventional pitfalls of car buying, like obtaining a loan at a favorable interest rate and getting a decent trade-in value for your old vehicle. So while Costco makes it easier for anybody to get a decent deal, some of the legwork required for scoring a great deal will still be necessary.
To be sure, seasoned car buyers who don't mind a possible confrontation and who value money more than some extra time spent can likely beat a Costco deal by working the phone, email, and text messages to correspond with a larger number of dealerships. Likewise, those folks will enjoy a wider selection of vehicles from multiple area dealerships, not just one. Even if that means engaging with the occasional quintessential shady salesperson.
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