Yes, It’s a Good Deal, But There Are Caveats.
For a lot of buyers, Costco is the ideal place to shop: The company is known for great stuff and top brands at rock-bottom prices. It’s the same with cars. You can buy a car at Costco through the Costco Auto Program and get a pre-arranged, rock bottom price on pretty much any car. However, getting that deal isn’t always easy. Here’s our guide and insights from the experiences our readers shared after we published this story about buying a car from Costco.
The Deal: How to Buy a Car at Costco
First, it’s important to understand that Costco outsources its auto program to a third party. The company you’ll be working with, while not a Costco-owned entity, adheres to Costco’s customer service and pricing policies. This means that you can appeal to Costco Auto if you have a question, need to find another dealer or don’t have a great experience.
To get started (after you’ve done your research, know your budget, the car and the features you want and are ready to take a test drive) fill out the form on the Costco Autos site. The dealership will call you to arrange a test drive. This is important: by calling you, you know that you’re talking with the authorized dealership, not a dealer who also offers the “Costco price” (keep reading for more on that).
You’re not buying from Costco, you’re buying from a dealership. But it’s OK.
Yes, you’ll be working with an auto dealer, not Costco, on your purchase. But take comfort in the idea that this is a Costco authorized dealer who has at least one Costco-trained sales person on staff and he or she should understand the exact details of the program. Sometimes there’s only one person in the dealership who has attended this program, so you might have to wait until that person is available.
Costco authorizes one dealership per brand in a designated area. This means you may only have one option in your town, and if you don’t like the dealer, the deal or they don’t have the car you want, Costco may be a no-go for you. But, you can go to another branded dealer and ask for the same price or you can call Costco Autos for the name of the dealer in another region (you can still go to any dealer for service or recalls).
We found that often non Costco dealers will offer the “Costco price” even though they are not Costco authorized. You might get the Costco price, but you might not get the Costco experience.
Too good to be true? No pressure, no commitment to buy
Part of Costco’s promise to customers is an experience free of pressure to buy and a commitment to purchase. Once you’ve been contacted by the dealership you should able to take a test drive without being pressured to purchase. And you’re free to walk away if the car or the deal aren’t exactly right.
While many customers found the experience to be just this, many also did not. Many felt that the dealership expected the customer to buy, pressured them to buy other things, like an extended warranty, and that the experience didn’t feel right. Costco members can call the Member Advocate line for assistance with the purchase, or if it just isn’t right, walk away. No deal is a good deal if it isn’t the right vehicle for you.
What isn’t a good deal: Haggling
The magic of the Costco Auto Program is buying a car at a no-pressure, no-haggle price. Often dealers will have other things to sell you once you’ve agreed to buy the car, and this is where they make money. However, Costco has also negotiated a discount on these items! Things such as an extended warranty, financing, dealer installed options and extras (such as floor mats) can also be bought at a discount. But again, if it’s not the right thing for you, be prepared to stand your ground and even walk away if the dealer pressures you to buy things you don’t want.
The Price: Is it a good deal?
In theory, yes. The pre-negotiated price that Costco Auto Program offers customers a discount off the manufacturer invoice. A dealer should give customers (in writing!):
- The MSRP (price on the Monroney)
- The invoice (price they paid for the car)
- Available incentives from the manufacturer
- Available incentives from the dealer
- Final price should include delivery charge (usually about $900)
Typically, the final price is a discount off of the invoice and any incentives that are available should be included (this can vary by model and type of purchase). However, sometimes the price is based on the invoice price plus a small markup. This can depend on the popularity and availability of the model you want. Also, there may be better deals on select cars. For instance, there are times when Costco offers extra incentives on select brands that include a Costco gift card–often up to $700 –on top of all the discounts.
If you’re not offered this transparent price in writing, you may not be dealing with the Costco person or even, a Costco authorized dealership.
Getting the best deal means being prepared. Here’s what you need to do
Even the Costco promise can’t protect you if you’re unprepared; this means doing your homework before heading to the dealership. Here’s our checklist
- Know your budget: What can you really afford per month? Know this number clearly (don’t share it with the dealer, though; keep it to yourself and use it to check the math on the deal)
- Know your credit score; this is the key to your interest rate
- Arrange your financing ahead of time. The ability to sign paperwork and have money transferred gives you the upper hand, and if you don’t want to finance through the dealer, you don’t have to
- Know the car and options you want. You can shop and build the model you want on any brand’s website. Do NOT do this at the dealership
- Research local dealers. Even the Costco authorized dealer may not be the right dealership for you. You should be able to negotiate a similar price from a dealership that wants your business, but of course that’s not the no-haggle offer that Costco makes
- Expect to review papers, examine the details of the deal and if you’re financing through the dealer, negotiate your financing. Even with a no-haggle price, there is paperwork that has to be completed.
- Know when to walk away. If things don’t feel right, the dealership isn’t transparent, they insult you or they don’t have the car you want
You can read more comments here from our readers on their experiences with Costco Auto Program and the dealers in the program. It’s a mixed bag, but it is possible to get the deal you want at the Costco negotiated price.