Summary: This post reviews the Costco car buying program and its associated pricing compared to negotiating a purchase on your own.
After I got a great deal on my latest car purchase using my tried and true method for saving a fortune on a car I was in Costco shopping a bit.
As I exited the store, I saw a small flyer on the Costco car buying program. Their car-buying service (which is basically a set of relationships they have set up with dealers) focuses on great prices (of course) and ease of purchase.
I had always wondered if their service was worth it (i.e. how good their pricing actually was), so I emailed my dealer and asked about Costco pricing.
He was a bit hesitant to share details with me, but I didn’t give up easily. 🙂
After a few emails back and forth, I was getting a bit frustrated. I finally got to this message to him:
Here’s what I want to know:
If I had used the “Costco car buying program” on the car I just bought, would that have been more, less, or the same as the price I paid?
That’s the question I’m asking.
Here’s what he said:
The Forester you just bought would have been more [with Costco pricing]. Remember we waived the dealer handling. With Costco’s car pricing you will pay the dealer handling.
The dealer handling at this specific dealership was $389, so my ultimate price was (in theory) $389 better than Costco’s price. Which, if you remember the numbers I ran when I bought my car is a GREAT price! Still, it’s not as good as I got since I was able to negotiate no dealer handling costs.
In addition, without the bidding process I go through, it’s doubtful that the price would even get to the level I got to. Why would I say that? Because his initial “great offer” was not as good as his final “better offer”. That’s what competitive bidding will do for you. 🙂
Wanting to confirm my understanding, I responded back to him:
That’s what I wanted to know, thanks.
Is the dealer handling the only difference or would the Costco base price been higher/lower as well? And if so, by how much?
I’m asking more for curiosity than anything else. Costco touts their program as being so great, I’m just wondering if that’s true.
His response:
Costco pricing is set by the dealers. They can not sell a vehicle to you, they are not licensed to.
They will send your information to the dealer and we send you the pricing.
The price we give you is net, net, net. This is the price we pay for the Forester. The Costco price would have been the same other than that. That was the price I gave you on the Forester before we took off dealer handling.
Again, I doubt it would have been this good without the competition, but maybe it would. Anyway the response satisfied my curiosity. Costco pricing on cars appears to be very good, but still not as good as someone using the bidding process I recommend.
The one caveat is that dealers seem to have some flexibility in setting the Costco price, so your mileage may vary (pun intended).
The method you use Joe Average may not be able to do because they don’t have the financial resources. Joe Average can’t buy a car cash in a competitive bid of price comparing amongst dealers. The internet is changing all that in my dealer friend says the majority of his used car sales are people who find the vehicle on his website. You are using it for competitive bidding to your advantage.
Plus you have reduced variables of where a deal makes there extra money on your purchase.
1. Don’t trade in a vehicle in that they may give you a fantastic price on the new car but a lower trade in value.
2. If you need to finance, Don’t finance through the dealer. You can get better financing outside a dealer. In your case there was no financing.
The dealer you dealt with may have had excess inventory and wanted to move that car instead of paying for additional carrying costs or interest to have the car on the lot. The dealer figures they could get future business from you to help recoup their initial loss in the way of maintenance or other services. Maybe even your next purchase. But probably freeing up money is his main reason.
Costco probably makes arrangement to have cars available at dealer invoice plus a small fee. My brother worked briefly for a car dealership and with his first week he received a call saying “That red car you have on the lot I will give you $350 over dealer invoice cash.” Not knowing what to say he asked his supervisor and got the OK to sell it for that price because they needed to reduce inventory and a no haggle sale is still a sale.
Sounds similar to Costco pricing.
Most of the times I buy cars, it’s not the dealer having extra inventory. Most of the dealers are bidding on the same car (to my exact specifications) that’s on someone else’s lot (maybe hundreds of miles away). At that point, they’re simply looking to make any sale because any sale is better than no sale (just as you said). And hence the price drops.
I tried to buy a new Toyota Camry through COSTCO and they referred me to a dealership over 60 miles away. I live on Long Island and there are 5 dealerships within 12 miles of my house. I’m VERY, VERY DISAPPOINTED!
Call the Internet Sales Manager at your preferred dealership and let them know your situation. They might actually be able to offer the Costco pricing. It worked for me. The Costco dealership I was originally referred to was a bit further than my local dealership, however my local dealership is an affiliate of Car Pro USA. I went to the closer dealership to get the Car Pro price and let them know that I intended to go to the other to find out the Costco price. The salesperson was able to pull up the Costco price which was better than the CPUSA price. I was a bit annoyed I wasn’t referred there to begin with but it worked in my favor as they gave me a sweet deal to keep me from leaving to price shop. Super happy with the very transparent process! M
I like your choice in cars (Forester). Subaru’s are nicely priced, of good quality, have good resale value and do well in the snow with their four wheel drive. Your intelligence with money spills over in your choice of cars.
this comment deserves a ‘like’ button – but i can’t seem to find it…
Thank you. Your comment is even better than a like button. Maybe this site will start to include like buttons for the comments. An idea to ponder over.
We’ll see! 🙂
I have so many ideas to develop the site I just can’t get to them all!!!
Thanks for the legwork on the CostCo plan. I have always been intrigued by their program but have never done the due diligence to compare.
Growing up, I always went with my dad to buy our cars and the salesmen always called him “an old horse trader.” I still like the give and take of good negotiation and don’t see how an established program like CostCo’s could compete with a negotiated deal.
This method of determining what you might have paid under the Costco program, seems rather unscientific. The dealer has no incentive to work up a Costco Quote for you, since you aren’t in the market to buy a car, so even responding to your emails is a waste of time. Every car is unique and so he’d have to spend time calculating a true Costco program quote for your car, time he could spend selling cars and making money or at least drinking some bad coffee.
Further he may have an incentive to inflate the Costco price to get you to come straight back to him and skip the middleman, assuming Costco gets a cut (referral fee or something which seems likely). And also, to tell your friends to go direct and to post on the internet about it too!
That said, from what I have heard, the Costco price is good but not super low. The method others have used was to take the Costco quote as a starting point, and then go and negotiate down from there. From what I have heard they usually succeed, thus proving that the Costco quote is not rock bottom.
Just as background for your readers, my wife and I just purchased a new 2017 Toyota Sienna LE at the end of July 2017. There are two dealerships in our area, one of which is the Costco Dealership. The first bid I received from the “Other” dealership was $1,200 lower than the one through the Costco Program on vehicles that were within $50 MSRP. I’m sure that the Costco Dealership would have offered a better price than the Costco price if I had negotiated with them further, but they didn’t have the color I wanted, so it was a moot point.
I’ve read on other sites that the dealership pays Costco a per vehicle fee of ~$400, so that’s $400 less they have to wiggle when compared to other non-Costco dealerships. If someone feels uncomfortable negotiating, then maybe the Costco program is for them, but my experience just using the “ePrice” button on dealership websites or sending an email produced much better results without much more work or any awkwardness.
I would like to find the lowest out-the-door price someone has paid for a specific vehicle. In my case a 2018 Subaru Crosstrek with CVT. Then I would have an idea of how low a dealer might go.
What did you end up paying for the Crosstrek. Looking for something similar and curious which trim and did you get eyesight…
I tried to use the Costco program. The participating dealer was only 10 miles away, which isn’t too bad. But there are at least 3 other dealers closer than that to my house. The salesman wouldn’t give me any pricing by email nor over the phone, “to protect the integrity of the process” or some such baloney. I don’t need Costco to get an offer of “come in and we’ll talk about it!”
This. 100,000 likes on this comment. Using Costco in my experience has been a complete waste of time and energy, I’ll not do it again because of this – dealers will not commit to a price until you walk in their door which is a waste of my time and theirs. Too bad they’re too stupid to understand that.
I bought my 2016 Forester using the Costco program and it was $2,000 under the MSRP. Looking at a 2019 Crostrek and consumer reports talks about getting $2,800 to $3,100 below the MSRP but so far we have not gotten to the $2,000 below the MSRP from any dealership. Still waiting for responses from a few.
When I bought my 2017 Forester Premium in April, 2017 I was able to find a dealer willing to sell it for $4,000 under MSRP (with no trade-in or dealer financing involved). To get that price I had to carry on email negotiations with 5 greater Sacramento area dealers and 2 in the S. F. Bay Area. The best offers I received from Sacramento area dealers were at least $1,000 higher than the two from the Bay Area, which were virtually identical. It seems to be a matter of finding the dealership that is the hungriest at any point in time.