Is Costco the Best Place To Buy a Car?

Many U.S. consumers don't like haggling over car prices. Nearly half (48%) of shoppers say negotiating the price of a new car is the worst part of going to a dealership, and 42% fear getting ripped off, according to Autolist. Those concerns could explain why Costco's Auto Program, which arranges no-haggle car-buying discounts for members, is growing in popularity and may be the best place to buy your next set of wheels. 

Not already a Costco member? You can apply here. 

Related: I Joined Costco. Here's What I Wasn't Expecting

Buying a car through Costco may seem like an offbeat choice, but the numbers say otherwise. More than 2.3 million Costco members have bought discounted vehicles through the program in the past five years. In 2021, more than 775,000 members bought cars through Costco, according to the company, up more than 12% from the previous year. The program offers leases as well.

Related: 20 Things You Probably Didn't Know About Costco

Buyers are eligible for a variety of manufacturer incentives and rebates, which Costco lists online. The Costco Auto Program also offers limited-time specials on certain high-end vehicles. For example, Costco is offering members a $1,000 incentive on the purchase or lease of new 2022-2023 Cadillac vehicles. The deal is good through Feb. 28, 2023, and is available to Costco members who signed up by Jan. 3. Interested members must register online or by phone to receive a certificate with a promotion code.

The Costco Auto Program isn't just for shoppers who want a shiny new car, truck, or SUV. The program extends to RVs, as well. It previously included motorcycles and small vehicles such as ATVs, golf carts, and snowmobiles, but those are no longer available through the program.

Related: Is Buying an RV Through Costco Worth It?

Costco Auto Program buyers aren't limited to new vehicles. Factory-certified, pre-owned vehicles also are available. These are cars that have undergone dealer inspections and reconditioning to ensure they meet certain eligibility requirements for mileage and time on the original factory warranty. Pricing is based either on low- to midrange Kelley Blue Book values or a set discount based on the dealer's lowest advertised price. 

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Although the Costco car buying process makes up the core of Costco's Auto Program, the warehouse club has also used its clout to wrangle other benefits for members: at least a 15% discount on automotive parts, services, and accessories at participating service centers. A savings cap of $500 applies on each visit, and there are some exclusions. Card members can also get $100 off work at a dealership (or $200, for executive members).

There are more than 3,000 participating Costco Auto Program 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 employees are tested occasionally by Costco mystery shoppers to be sure they're following through on discounted pricing and the pledge to provide a good, no-stress buying experience. Dealerships that fall short during a review can be kicked out of the program.

When presented with Costco Auto Program pricing, members can review the vehicle's invoice price (what the dealer supposedly paid the manufacturer) and the manufacturer suggested retail price. Costco also has a team that compares its discounted prices with dealers' prices to make sure they remain competitive. Additionally, member advocates are available to help with each step of the process.

Costco makes no money off the sales; dealers pay a monthly fee to participate in the program. Costco car representatives have no loyalty to a particular manufacturer or dealer, so they can be trusted as advisers, according to Philip Reed, an automotive expert who writes for NerdWallet.

To begin the shopping process, members first 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 can review information about participating dealerships nearby and the specific employees authorized to offer the program's prearranged pricing. Prices for specific vehicles aren't provided until they visit a dealer.

The ongoing global microchip shortage has severely reduced dealer inventories and may affect Costco members' ability to find the vehicle they're looking for. Shoppers should "discuss current vehicle availability with your Approved Dealer when you schedule your appointment," Costco advises on the site.

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. But shoppers aren't required to buy and can use the Costco pricing when bargaining and buying at other dealers. Regardless of how good the deal is, an auto program quote gives Costco members a valuable ballpark price point for car shopping.

Of course, your member discount through the Costco Auto Program will vary depending on factors including location and the make and model you choose. On average, though, using the program saves buyers about $1,000 off the average transaction price in their local market, according to program representatives.

NerdWallet's Reed says he wouldn't recommending joining Costco just for the auto program. Even though he has used the service and observed that drivers can get fair prices buying vehicles in plentiful supply, he says rock-bottom prices are more likely for those who play hardball. "The Costco program isn't always the lowest price. Shoppers who want to contact multiple dealerships and maybe do a little haggling can possibly get a better price." Redditors echo his thoughts: Although many are pleased at the no-hassle feel of the experience, others say they got a better deal by shopping and negotiating the old-fashioned way.

Costco isn't alone in offering group-buying discounts on vehicles, so if you don't have a Costco membership and don't want one, there are alternatives. "Shoppers might try a broker, or a car concierge who might charge a fee but will offset it with a better deal," Reed says. He also recommends checking with AAA, banks, and credit unions.

Factory add-ons are part of the Costco member price. Participating dealers agree to a minimum savings on any additional accessories or add-ons, and many offer more than the minimum discount. But it's still up to buyers to get the deal properly financed, negotiate the value of any trade-in, and navigate the world of add-ons and upsells, which can still add some stress to the shopping experience. "You still have to safely navigate the finance and insurance office," NerdWallet's Reed says. "This means the finance officer will pitch additional products to include with your car. It's a good idea to think this through beforehand, so you can make sure you know what you want. Often, these additional products can be purchased later, at a lower price, elsewhere."

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