Is Costco the Best Place to Buy a Car?

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Americans don't want to haggle over car prices. In a study by auto research site Edmunds.com, 83 percent of respondents said they prefer to avoid haggling, and 1 in 3 would rather to go to the DMV or do their taxes than buy a car. This could help explain why Costco members bought more than 520,000 vehicles through the warehouse club's Auto Program in 2017, more than doubling sales since 2008. Costco locks in prices by negotiating on members' behalf, using the size of its customer base as incentive for dealers to come in with their best offers.

Regardless of how good the deal is, an Auto Program quote gives Costco members a valuable ballpark price point. Shoppers considering a Costco membership solely for access to the Auto Program should think twice, however, especially if haggling without backup seems manageable. Experts and consumers say direct negotiation can still yield a better deal, and save an annual membership fee of at least $60.

To research and select a vehicle, members go to the Costco Auto Program website or they may call its customer service line and talk with representatives who can guide them through the process. After selecting a vehicle, members are sent information about participating dealerships nearby and the specific salespersons authorized to offer the program's prearranged pricing. They are not provided a price for a specific vehicle until they visit the dealer. That is when they find out the program's prearranged price is from the Costco Member-Only price sheet. Shoppers are not required to buy and can use the Costco pricing information when bargaining at other dealers.

Costco does not make money off the sales; dealers pay a monthly fee to participate. Costco car representatives have no loyalty to a particular manufacturer or dealer, so they can be trusted as advisers, according to Philip Reed, senior consumer advice editor at Edmunds.com.

The program is transparent: Members can see a vehicle's approximate invoice price (what the dealer allegedly paid the manufacturer) and MSRP (the sticker price the manufacturer suggests).

Costco Authorized Dealers

There are more than 3,000 participating dealers in the United States and Puerto Rico. Costco trains and certifies dealership employees, some of whom may act as representatives for other car-buying programs or serve on a dealer's Internet sales team. These Authorized Dealer Contacts are tested occasionally by Costco mystery shoppers to be sure they're following through on pricing and the pledge to provide a good, no-stress buying experience. Dealerships that fall short can be kicked out of the program. Costco also has a team that compares the Auto Program's prices with dealers' prices to make sure they remain competitive. In addition to new and factory-certified used cars and trucks, the program extends to RVs, motorcycles, and small vehicles such as ATVs, golf carts, and snowmobiles.

Here are three things shoppers should keep in mind about the Costco Auto Program:

Costco's prices are good, but likely not the best.

Although Costco's rates are fairly competitive, rock-bottom prices are still reserved for those who research, shop around, and negotiate. Reed, Edmunds.com editor, says he wouldn't recommend joining Costco just for access to the Auto Program, but he has used the service and observed that drivers can get an especially fair price for vehicles in plentiful supply.

Comments posted online indicate that Costco's program appeals to car buyers who want a competitive price but don't want to take the time to shop around or deal with the pressure of negotiating the best price. Others have used Costco's quoted price as a starting point for negotiations and requested several other quotes directly from local dealers.

The price is only half the battle.

Buyers willing to spend a little more to avoid haggling should note that it's still up to them to get the deal properly financed. Factory add-ons are part of the Costco member price. Participating dealers agree to a minimum savings on any additional accessories or dealer add-ons, and many offer more than the minimum discount. Buyers are eligible for manufacturer rebates and incentives, which Costco lists online, as well as dealer-backed financing offers, but are on their own in determining when a deal is a deal.

This isn't the only chance to avoid haggling.

Costco isn't alone in offering group-buying discounts on vehicles. AAA, some banks and credit unions, and the United Services Automobile Association, a financial services group focused on members of the military and their families, among others, offer similar programs to members. If you don't have a Costco membership and don't want one, there are alternatives.

Related: 12 Ways to Avoid Getting Ripped Off at a Car Dealership

Related: 10 Futuristic Changes Coming to Our Cars (and One That Isn't)

Related: Costco by the Numbers: 22 Surprising Stats

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