Costco's car-buying program: Here's how it works

The Costco Auto Program’s come-on is enticing: “Car buying made easy!” Who among us wouldn’t respond positively to such an proposition?

Since 1989, Costco, the wholesale retail giant, has been offering its members special pricing deals on new and used vehicles through its Costco Auto Program. The company says buyers typically save $1,000 by taking advantage of this service (an annual Costco membership is $60).

There are pros and cons to using this method, and prospective buyers need to be aware that Costco doesn’t run it as a charity: it works with “selected” dealers to whom the customers are referred; the dealer network in the U.S. has about 3,000 participants. Ostensibly, both Costco and the dealers stand to make money when a deal is made: The dealers pay Costco a fee, and they make money when they punch out the deal.

Prices are set in the program, a perk for those who hate to haggle. Costco does offer customers a research tool to check out vehicles by type and compare specs and features. At some point, after entering a bunch of details online about the car being considered, one is required to actually visit the selected dealership, chat with an “Authorized Dealer Contact” and discuss the fine print.

Regarding the “no negotiating” provision, there is an opportunity to negotiate if you’re trading in a car. As most of us know, that almost always involves haggling.

After the discussion with the salesperson, buyers can view the “Costco Member-Only Price Sheet,” which, according to the Costco website, “displays your prearranged pricing. The savings can be displayed in one of two ways: One version lists pricing for all models available at the participating dealership; the other will show a VIN-specific price based on the vehicle you select, including any applicable manufacturer incentives or rebates.”

Vehicles can be obtained by dealers swapping with other stores or filing special orders, although dealers are usually more eager to unload those cars already in inventory to avoid paying monthly interest charges.

One need not use Costco to get incentives or rebates offered on a specific vehicle. Also, not using Costco means you can go to any dealer for a purchase and even pit them against one another, rather than going to the limited stores that Costco works with. 

The program itself does not offer provisions for financing, loans or leases, so that’s usually arranged through the dealer, or the buyer can go to his chosen bank or credit institution. In many cases the vehicle manufacturer can offer financing deals.

Regarding dealer add-ons — a common tactic to expect when buying as new car — Costco says its members are not obligated to sign up for any, such as an extended warranty.

Regarding pre-owned cars, Costco says under the program that those “are rigorously inspected and reconditioned for quality. They are typically sold with a factory-backed warranty extension. These vehicles can only be purchased from franchised dealers who follow the manufacturer’s certification standards.”

Here is a list of frequently asked questions about the Costco Auto Program.