Can You Get a Good Deal Buying a Car from Costco?

On my post titled Buying a Car Using the Web, I recently received this comment:

What do you think about the Costco car buying program? Can it compete with your method?

It's an interesting question. I'm not sure about the answer.

My method got me deals that were very, very close to the true dealer cost (including kickbacks from the manufacturer), so it's hard to believe I could have done better. Then again, every time I walk by the car-buying section of Costco, I wonder how good of a deal they could get me. FYI, I wasn't a Costco member when I bought my last car, so I didn't even know about it then.

Anyone used the Costco car-buying program? What did you think of it?

Comments

[xshanex]

I used the costco auto buying program when buying my Toyota Tacoma last year and saved between $4-5 thousand over msrp and was able to beat out the Edmunds TMV price as well. Costco has different deals negotiated with the dealers for different models and the Tacomas were $500 over invoice....from what I understand it can vary a bit depending on make/model. The reason I'm such a big fan of the Costco program is how easy it was to do. There were no sales tactics or spending hours/days negotiating with different dealers. I had already test-driven every truck in the class or close to it so I simply went to the Costco website, found my local Toyota dealer, drove over there, and told them what I wanted. They told me the Tacoma deal and found one of the 2 Tacomas in the Eastern US that actually had all the options I wanted (side curtain airbags, off-road package, Black, crew-cab, 6 disc-changer among other things) and I filled out the paper work and ordered it. It was the most laid back and enjoyable buying experience that it was just amazing that it could be so easy. Since I bought a fully loaded model I ended up getting several options/accesories that I didn't want for free. The only issue I had to negotiate was my trade-in which wasn't worth selling on my own as it was not a very desirable model to private parties and the trade-in was fairly close to the private party value. I had to stand firm on getting the full book trade-in value as a condition of my deal. The dealer gave in as they knew I could go to another Toyota dealer and get the same deal on the Tacoma. My truck was brought down 250 miles and was ready for me 4 days after I went in.

The biggest benefit with the Costco program to me was with higher demand and hard to find models. There were only 2 trucks in the Eastern US that were optioned out like I wanted. I had not been able to find any at all when I had been looking months earlier and was told that it would have to be ordered from the factory and that I would have to wait up to 2 months for my truck to be made and delivered. If I had been negotiating normally it would have been a very long process and the dealership would have had a major advantage and there is no way I could have negotiated a deal like I had. My supervisor was actually negotiating back and forth for weeks on a 4runner at another dealership and they would not give him the deal he wanted. They simply refused to sell it for the price he wanted. When he went back in there after hearing about the Costco program they immediately gave him the Costco deal which was much better than the deal he had been trying to negotiate for.

The interesting part was that since my truck was a dealer trade all the paperwork was still in it when I took delivery. I was able to see what the holdback was and all the fees to the gaining dealership and was able to see their profit. It was right under $2k which is normal profit for the dealer and on the low side of what they'll sell a popular vehicle for. I'm sure if I had spent a lot of time and energy I could have found a slightly better deal but it would have only saved me in the hundreds for a lot of time and effort.

[Douglas]

xshanex,

Thanks for your input. But unless I didn't read it right, I don't see how exactly does the Costco deal works?
Do you go to Costco before or after going to the dealer? When is the price set? What about financing?

[Pinyo]

I am a Costco member, but have never tried that program. Based on xshanex, I will have to research this program for our minivan purchase.

[Mike]

These "deals" are pre-negotiated arrangements (a certain amount over invoice) that are made with dealers for the benefit of Costco's members. BJ's, Sams Club and others have similar arrangements. Generally if you do your homework and are good at dealing you can do a little better. However, for many people that are not good at dealing or don't have the time to do all the homework this could be better than what they could get. I am a BJs member - you basically call their auto buying number and they refer you to a local dealer for the car you want to buy. Then you contact the dealer, tell them you were referred by BJs (or Costco), what car you are interested in etc. They will tell you what they have and how much it costs.

I've never actually bought a car this way but I have looked into it. I was able to get another hundred or so off the invoice by "dealing" with them. But if you want a quick deal for a pretty good price, go for it.

One potential drawback is that you might not have much choice in the dealer they send you to. It might end up being one that you may not like for one reason or another or it may not be the most convenient for you.

My advice is call them up, see who they refer you to and see what they offer. Then try to see what you can get on your own.

Good luck!

[xshanex]

A little more explanation.....

Costco basically has agreements with most manufacturers where I believe they pre-negotiated prices on different models. Here is the link http://www.costcoauto.com/enterzipcode.aspx?gotourl=%2fDefault.aspx They have updated their website since I used it and you can fully option out your car on there and find the invoice and msrp like many other car sites. The site then gave me a listing of local toyota dealers that had the costco auto buying program. It's all online and then you enter in your costco # and it sends an email to the local dealership....I just went in and asked them what the price was and said I was a costco member. The sales manager brought out a Costco folder and after looking at it said they were $500 over invoice for Tacomas no matter what options or configuration. I then ordered it and had the dealership call my credit union and fax them the purchase order. My CU then sent me some paperwork and a check to give the dealership when I picked up the truck. I never had to actually set foot in a costco through the whole process even though I love shopping there. I considered using Costco for financing but am loyal to my credit union which I have been a member for 12-13 year....they are competitive with everywhere else as far as rates and terms. I also liked calling up and dealing with the loan officer who knew me and had helped me purchase 6 other vehicles over the years.

Their program is more or less equivalent to those services that people pay for where the company negotiates the price and finds the vehicle for you....except it's free. USAA also has a similar program that I was thinking of using.

I am not saying the Costco program is the end-all-be-all for auto purchasing. If you're happy with an off-color last year's base model of a domestic manufacturer that has huge incentives and a promotional low interest rate then you'll get a screaming deal. I'm also sure that someone out there will always get a better deal than me on anything I buy but getting the Edmunds TMV should be very easy with the Costco program. I found the benefit of the Costco program with vehicles that normally aren't sold at a huge discount if any like your Acuras, Hondas, Nissans, and Toyotas. Many people pay full msrp on popular vehicles or don't realize how much negotiation room there is on them. I have worked at a dealership and talked with many sales people while I was looking and they laughed about the common perception that if you buy a Toyota Yaris/Prius/Camry/Corolla/Tacoma or Honda civic/accord/pilot that they barely negotiate or you have to pay msrp. I knew exactly what I wanted down to every last option which was about every single one available on a Tacoma. I did not want a base model or one with weird options or colors and was very particular about it because I wanted the side curtain airbags and stability control. I will have this truck as a primary driver for several more years and plan on keeping it for the next 15 years or more so it was worth it to me. The options are pretty cheap at invoice as well.

[Aaron]

I don't have experience, but my professor talked about his experience with the Costco Auto program. He said he paid dealer invoice minus kickbacks + maybe $200 on a Honda and he said that Honda's specifically are low cost like this through Costco, but Honda doesn't advertise this.

I'm not sure if this information is accurate, but that's what I heard! Verify it for yourself and good luck!

[Chief Family Officer]

FYI, AAA also has a similar program in my area. I took a quick look at it back in 2003 when we bought our last car and concluded that we could do better negotiating ourselves. But that was with my husband taking the lead on coming up with a price he felt the dealer would come down to and doing the negotiating. If I was on my own (not being comfortable with the pressured negotiating), I probably would have gone with AAA's program.