Is Buying a Car through Costco a Good Deal?

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In the April issue of the Costco Connection, they tout their car buying service with the following facts and figures:

• 96.5% rated the professionalism of the authorized dealer contact as "good to excellent." (86.4% said "excellent)


• 96.4% would recommend the Costco Auto Program to others


• 96.3% rated the value of the Costco Auto Program "good to excellent" (84% rated it "excellent")


• 200,000 vehicles sold through the program last year (over 1 million in the last five years)


• 2,200 dealerships are part of the program


• Costco members save $200 million last year through the program

Here's the pitch for the Costco Auto Program (in my words, spoken by Costco):

• We're huge and as such, we can negotiate the best possible prices.


• We've done this with 2,200 dealers.


• All you need to do is let the dealerships know that you're a Costco member (not sure how this is done), and you'll get the cheap, pre-negotiated price.

I have thought about using Costco to buy a car, but I'm a bit leery of the program. I'm sure they do have the best price (or close to it) for a mass-negotiated program. But I'm not sure they can do better than I can using my tried-and-true method of buying a car (which involves the apparently successful method of using the web.)

My suspicions were reinforced when I saw this comment on my post titled How to Buy a Car the Same Way You Would Buy a Big Screen TV: 

I purchased a new car in 2007 doing just this. My comparison price was the so-called "no haggle" price available from the likes of Costco and AAA. I saved some $2,600 compared to those Costco/AAA prices, which were already discounted. A few observations:

1) I can only assume that whoever wrote that somehow this is a huge time commitment doesn't realize how much of a commitment it is to drive around to several dealerships and think you'll do better. If you do this right, you're only visiting ONE dealership, and that's just to do the paperwork.

2) I would make two alterations to the author's recommendation as written. In Step 2, you have to get dealers to give you an all inclusive quote to drive it off the lot. Dealers think that car buyers just want to brag about discounts below MSRP, so that's what they'll dangle if you let them. The problem with a price $X below MSRP or over dealer invoice is the double-secret sucker fee they tack on at the bottom of the invoice. Tell them you don't care about anything but the bottom line and not to bother impressing you with line item discounts.

3) In my approach there was no negotiation, really, not in my experience. Tell them up front what you're doing and that you don't intend to haggle, just to buy from the lowest bidder. One third will balk or won't reply and two-thirds will. For the ones who replied, the prices were great and nobody budged from their initial response, even when I told them they were underbid.

4) Two other things surprised me. 1) One guy actually tried to argue that the lowest price -- remember, this was the all inclusive price, calculated to the penny -- wasn't necessarily the "best price." He knowingly implied that there was some other, secret definition of "best price" that he knew and I didn't. Guess he showed me. 2) Before visiting the dealer who quoted the best price, I called a dealership close to my home (a dealer who never replied to my initial e-mail) to see if they'd match my best price. Over the phone they said they would and invited me in. When I visited they TWICE tried to bait/switch me with the paperwork. First they asked me to sign an invoice with a higher price, and then they asked me to acknowledge the options on a separate sheet, which was a blank sheet of paper. After I made them correct both, they gave up and gave it to me for a few dollars less than I asked.

So, have any of you used the Costco Auto Program to buy a car? Do you think you got a good deal? Why or why not?

Comments

[Darin H]

I think we might use the Costco Auto Program next time we buy a car. It's not the absolute best price you're ever going to find, but it's going to be a good price, without a lot of the work. Especially good if you aren't the best negotiator - which I think is what the program was designed for. Probably good for something like 50-75% of the population.

[Wil]

I've never used Costco or AAA, but if you belong to a credit union, many work with a service called Autoland. Having worked in finance for almost 20 years, and having bought a few new cars, I would never go any other way. The proof was when my wife bought her new car and wanted to go through Autoland. I was young and full of myself. I told her I could save her money. After several hours of going to different lots (this was before we had easy access to the web), and several hours of negotiations, I won! I saved her a little more than $100.00.

[Corey]

I am a member of Costco, but haven't used the program. I guess I just assumed this was only for new cars....and I can't bring myself to buy a new car.

On another note - I have tried to use Carmax several times, but have found their pricing to be terrible (for buying a car, and selling a car). A few weeks ago, I traded my car in for a minivan (growing family). The Honda dealer gave me 2,000 more for my trade in than Carmax offered. Maybe I overpaid for the minivan.....but I don't think so since I did my research online.

[Steve]

I used the Costco program just to find out the price of a 2010 Toyota Highlander Limited vs the www.edmunds.com TMV (what others are paying). After entering all the info at costco.com, I received a call from the local rep. within 8 hours. I told him I was interested within the next 3 months and wanted to know his price. Initially he said he could not tell me over the phone based on Costco's policy but I was able to get it. It was $800 above edmunds price which was $800 above invoice. Not bad!

[Suba]

Costco/AAA type programs will be useful in at least 2 cases:
(1) People who are not very good negotiators or who don't want to negotiate. For them this is an excellent alternative. Otherwise they would have paid the full price. So this is a size-able discount for doing nothing different.
(2) New in-demand cars. When no one will go below the MSRP for a new in-demand car, Costco was cheaper. I tried this when Honda Fit came out. One local dealer was so confident that no one will sell a Honda Fit for less, when there was a waitinglist. So he said he will match the price - $600, if I could bring the quote. Well, the Costco dealer's quote was the best, I made him fax the quote to me, I sent it to the local dealer and price matched - $600. He tried to add a LOT of options, just had to keep saying "no".

[Holly]

I like the idea of 'hiring' Costco to negotiate for me. My husband and I are not the hard-nosed types.

I will be looking to buy a used car for my daughter and I will keep this in mind. Also, I am wondering if any of your readers have ever tried eBay Motors? And what was that experience like?

[Paula1849]

We were going to use the program, but the car we orginally wanted was not available at the one dealer. Yes it was a newer in-demand one. However, another dealer within the area had the model/make we wanted after trying to negotiate, I told them that if they couldn't match the Costco price we would wait for the other dealer to get more models in stock and they matched the deal.

I'm not saying I am the best negotiator but I did a lot of research online and was pretty happy with our deal.

[Jeffinwesternwa]

If it's at the acutal MSRP "invoice" (not the window MSRP sticker) price or less, it's pretty good deal, ...these days dealers are hurting and easily will deal off invoice vice MSRP. I got my '10 Jeep ORDERED from factory as I wanted equipped getting my name on the window stikcer vice the dealer :), no bait, no argument, just below invoice price w/o even using the Costco or USAA price which was just a tad over invoice. Been buying cars off the internet for 11~ years, get dealers to e-mail YOU, compete 'em and hold firm. Last two were below invoice ('03 Mazda and the '10 Jeep)

[Todd]

I used the Costco program about 5 years ago, and was very pleased. I may have saved another $500 by visiting different lots, but I was very satisfied with the Costco price and the lot had the exact model and color that I was looking for. I think the price was about $700 over invoice. One other thing that I really liked about the program was that you worked with individuals that are from fleet sales. No sales pressure as the fleet sales people don't make a commission on the sale.

[Roy Nelson]

At least in our area the car buying game has changed. I tried the internet, Samsclub, and in person haggling. We finally ended up with the best price (well below Edmunds pricing) at a no haggle dealer (I never had a good experience with no haggle in the past). All the dealers told me the prices are pretty well set by the internet. People do so much research and will buy from a dealer any where in the country prices have to be competitive. Prices are actually driven up in our area because dealers are selling their cars over the internet to higher cost areas of the country.

[John French]

I purchased my last two cars, a 2004 Toyota Sienna and a 2006 Toyota Prius, totally online and had good experiences both times. I did my vehicle research online, got competitive bids from dealers in a 100-mile radius, took the lowest bid to the nearest dealer (I have 3 in my immediate area) for a price match, and sealed both deals with little haggling. From what I've read and seen, it's really hard to know exactly what the dealer has paid for the car you want, and maybe it doesn't matter anyway: you're buying from your local market and they have a limited amount of wiggle room. You still have to watch for last-minute add-ons before you sign the papers, though. But, all in all, online shopping cuts out most of the song and dance I once had to go through to buy a car. Yeah, they're both Toyotas, but I've had no trouble with defects in over 90,000 total miles in the cars.

[CPA Abroad]

I am currently looking to buy a new car in about 3 months. We plan on keeping it for 8-10 years so I am ok with buying it new. We have been browsing using USAA's car buying service (we are not Costco members). Prices seem good, 1-2% lower than the carsdirect.com target price in general.

I bought a car in 2003 using only the internet/e-mail and got a price that was inside the dealer holdback amount (another dealer that was a friend of a friend told me).

I will probably e-mail all the dealers in a 100 mile radius and see if they can beat USAA's price. If not, I will just use the USAA dealer and get their price. In general, I try to spend as little amount of time in car dealerships as possible. Nothing kills a day like visiting multiple dealerships.

Anyone know if you HAVE to be a Costco member to use the service. I would guess yes, but there is not one close enough to us to warrant a membership.

[Todd]

CPA Abroad - Yes, you have to be Costco member to use the service. However, most dealers have their fleet managers contact info on their website and you could contact them to see what price they will offer. It has been my experience that the contact for the dealership for the costco program was usually in fleet sales.

[Stephan]

although i have never used costco to purchase a car, i am a member and would certainly consider it the next time i have to get a car. The Costco membership has been very much worth it since i got it, so i expect that their car sales program is of equally high quality.

Preferred Financial Services

[Aaron]

I purchased a 2011 Toyota Sienna for 27856 instead of 29541, so I saved $1700 just by emailing a few dealers through the web. So I can soundly say the Costco program is subpar. Even the truecar.com program was cheaper than Costco without shopping around.

[flylowguy]

I tried Costco's buying service and was astounded to find that the dealer's 'internet and online sales manager' treated me like an idiot and tried some rather blatant tricks and out-and-out misrepresentations. The info I got was misleading. The price kept changing. The taxes became an issue, as did the dealer "doc" fees. I finally just told him I was going to shop elsewhere (which I did without Costco
's introduction), and got a substantially better price and no twisted dealing or frustrations. AAA might be a better choice if you really don't have the guts to just call up on your own behalf.
Personally I think a lot of what dealers do is borderline criminal. It's a ragged bunch of lowball people all scratching and clawing for a deal. Nobody cares about ethics or fair business practices anymore.

[Rick Skinner]

I hope this adds food for thought. I too went through Costco. My sense is that the Dealer does not like the pricing. On my f150 the price is $1200 below invoice. If you can negotiate a better price, please call me. 858 336-0401. Perry Ford agreed to the pricing and then tried to get out of it (by lying). Here is my experienced recommendation. Call Costco, get a referral and then follow up, even after the deal is done. Costco will enforce their agreement and get you a refund if the dealer didn't follow the pricing correctly. (That info is from the local department head). Perry Ford claimed that I yelled at their employees and customers. I did not. Costco Yes. Dealer No. Last point: The Dealer will not tell you the bottom line if you need to order a vehicle, until it gets there. You do not have to buy it. They do have to sell it unless like Perry Ford, they lie their way out and claim they won't do business with you. The truth is that they will if you don't force Costco Pricing.

[Robin Maharaj]

I recently was contacted by a Costco Dealer in my area, regarding the intended purchase of a Toyota Highlander Ltd. After all the rigmarole, I found out that if I travelled the 15mile distance up and down a few times to buy the vehicle, waste good time, and be a yes-man, I would save the grand total of $100. Hell, the vehicle is quoted at $37,000 and I could get the same a few locations elsewhere at $36,888. I am dumbfounded but now I am starting to laugh crazily. Why? 18mths ago I replaced a home furnace costing $2,400 and Costco rebate was $200. It's a crazy world and even as Costco is a great place to deal with, the Costco Program to purchase a vehicle thru their dealer is no less than a scam, not Costco's, but the dealers'. I am a very dissatisfied user of the process. Costco is definitely being shortchanged. Haggling thru hard-nosed confidence brings better results.

[Adam]

Costco deals vary by make/time of year/etc. I shopped small to mid size AWD vehicles from Ford, Subaru and Hyundai through Costco in Q3 of 2012. The "Costco price sheet", which you should ask for the moment you walk in the dealership door, lists all the models from that manufacturer and the difference from dealer invoice. Subaru Outbacks and Hyundai Santa Fes were both listed at a Costco price of $1,000 below dealer *invoice.*

There is no haggling to get to that point, which is nice. However, looking online I found Hyundai offered several stackable factory rebates which took off another $2000 as the Santa Fe was going through a model change in 2013. Although my dealer gave me all the rebates and I went back 3 times over a two month period I did not get a penny more off than the Costco price less manufacturer rebates so I think that was the floor for them.

$25k plus taxes for a 260-hp V6, AWD, mid level trim package feels like a pretty good deal. Also 0% for three years on the half I financed.