Costco Auto Buying Program: Scam or Good Deal?

costcoauto

I’m paranoid about getting scammed.

It’s almost to the point where I don’t even want to answer the phone out of fear I’ll accidentally blurt out my social security number to someone claiming to work at my bank.

When it comes to car buying, my guard goes up like I’m a schizophrenic at a CIA interrogation. 

That’s why I was intrigued when I discovered an auto buying program at Costco. The company’s website claims Costco saves members a lot of hassle and an average of $1,000 off a typical transaction price. It works like this:

Members choose the make and model they’re interested in, then Costco refers them to a local dealer who shows the customer the vehicle’s invoice price, the MSRP, and the Costco no-haggle price.

A no-haggle price with built-in savings sounds pretty good on the surface, but still my paranoia wasn’t eased by browsing Costco’s website. Digging a little deeper online, I found a lawsuit filed in January by a New Jersey woman who says the program is deceptive.

Her main accusation, according the paperwork, is: 

The Costco auto program is misleading and deceptive because its “members only” price is exclusively defined in reference to the “invoice price” of authorized dealers. The Costco auto program does not control the underlying invoice price, and its participating dealers can and do manipulate that price in any number of ways.

A-ha! I knew there had to be something. Everyone knows dealers try to squeeze every ounce of cash they can out of people, so if there’s a price they’ll immediately accept, they must have a good amount of profit built in. Still, I trust Costco….

So I decided to put its auto buying program to the test.

While I was shopping to replace my wife’s car a few weeks back, we looked at getting a 2009 Honda CR-V EX AWD. It was black with a window sticker price of $25,635. We got pretty far into the negotiations before they broke down over the value of our trade-in. The purchase price we arrived at: $23,600.

With this in mind, I contacted the Costco Auto Program with no intent of buying, but to research this story. I wanted to see how close their offer was to the price I negotiated myself. I filled out the online form and waited 24 hours. They never called. So I called the “specially trained” Costco-approved salesman I was referred to and asked what my price would be.

He asked me to come in and see the car. I told him I’d seen it already and just wanted to know the Costco price. I eventually convinced him I wouldn’t come in unless I knew the price was acceptable. 

Then he told me: $23,900.

I admit, I was impressed. I came  to the conclusion that programs like Costco’s just might be worth it if you’re the kind of person who cowers at confrontation and despises negotiation. The deal, at least in this case, wasn’t too bad!

If you’re a negotiation pit bull, though, go after ‘em, and take every hundred you can get!

Would you consider, or have you used, something like Costco’s auto buying program?

-tgriffith

Find Used Cars in Your Area at CarGurus

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  1. | #1

    I wasted 6 hours to find out that just like when you walk into a Costco store you better know your price of an item at other stores before purchasing at Costo or you might regret the purchase. COSTCO AUTO SAVE is no different then Costco stores. BUYER BEWARE!!!!!! We just returned from a recommended Costco dealer, They quoted me $1000.00 over from a dealer that I visited the day before. I am not the negotiating type, when I told this Costco dealer of the difference their response were that the vehicle for that price did not exist and unless I sat in that $1000.00 less vehicle it definitely did not exist. I showed them the invoice that the first dealer gave us and told them that I did sit in the $1000.00 lower vehicle and in fact it had 2 additional options in it that Costco’s dealer did not offer in price. I told them have a good night and left.

  2. | #2

    Yes ,I’m quite interested in getting a C R V Honda for my daughter Erin who is

    in her 2nd year of college and would like to know if I could go through costcos with out getting rapped on the price ???
    Yes I’m a retired ny city firemen and the wife works as a schol nurse for my city, with a great credit report my home phone is 1 XXX XXX XXXX. Let me know how u feel thank u I have been with costcos for over 6 yrs and would like to know if I want to renew my membership , I’m on the fence, Costco has been good to us !!! Thank you

  3. Andrea
    | #3

    @

    Whoooaaaaaaaa that comment needs to be deleted. I don’t think James understands how the internet works or he would not have posted his home phone number publicly!

  4. 4mutts
    | #4

    Just bought a Toyota 4 runner through Costco and I took the out the
    door price (taxes, tags etc) that the dealer in my area gave me and
    contacted several other Toyota dealers. They couldnt beat the price
    that I had received and in fact many of them wanted to see the specs
    of the car that I was quoted on so they could find out what was on
    the vehicle. Then I went in and got some options added on and another
    350 dollars off. I also went in on the second to last day of the month
    and the second to last day of the fiscal quarter at 12 noon when it was
    slow.

  5. arieh cohen
    | #5

    I am shopping for a vehicle and today went to Inver Grove Heights, MN, Toyota dealer where I dealt with a Mr. Dan Schmitz. I informed him that I was a Costco Club member and needed the hassle/negotiation-free discounted deal made exclusively for Costco Club members.
    I was very specific about the model types and limits of accessories so when the returned quotes were given to me verbally, I was more then surprised.
    The quotes, were short on expectations and suspecting obvious dishonesty, I asked for the quotes to be given to me in a printed format.
    That request was denied/refused with further deception and a flat-out lie telling me that the quotes could not be printed (not a technical issue with the printer).

    Coming home, I found on the internet that the practice was universal with comments similar to this:
    The Costco auto program is misleading and deceptive because its “members only” price is exclusively defined in reference to the “invoice price” of authorized dealers. The Costco auto program does not control the underlying invoice price, and its participating dealers can and do manipulate that price in any number of ways.
    Feeling that Toyota must be above this obvious practice, I am posting this experience on-line, in the hopes that someone gives it the due attention and holds the practice of deception accountable.

    Price quoted with the Costco discount was $27 800.00 and should have been $26,593 to include the $810.00 destination charge.
    The second quote with the discount was $22 900.00 , and should have been $21,988.
    to include the $810.00 destination charge.

    Note to Toyota of Inver Grove Heights:
    By your actions, you have detoured me from doing all future business with you, and have given me the platform to inform the public of your dishonesty.
    You can not be trusted, and neighbors, Toyota, Costco, etc. will know of this experiance as well! !!!!

  6. sean
    | #6

    all dealerships are the same.. they are full of sharks and liars. They all promise a hassle-free transaction, so long as you give them exactly what they want LOL..

    Car salesmen are turds, while the sales manager is the biggest turd of them all, every stinking one.

    My suggestion is to go to a car purchasing company to do the negotiations for you. They will usually get your car at invoice or a little above invoice. They charge a flat rate (and probably take a cut somewhere in the sale, but they don’t tell you). At the end of the day you’ll still pay way less than you would trying to negotiate yourself. The car purchasing services comprise of ex sales guys who utilize their inside contacts to find you the car you’re looking for, at a much lower cost…

    good luck!

  7. Barb
    | #7

    I was very happy with the Costco Auto Program! I submitted online inquiries through the Costco website regarding several different vehicles and received prompt responses from the dealers. Each dealer had a different offer (one was $50 over invoice; another $300 over invoice; Subaru offered $500 cash back after the sale, etc). Most of the sales people were willing to give me their price by email but of course they wanted me to come in and drive the vehicle. I ended up purchasing a 2012 Honda Accord. I got an excellent deal on the vehicle ($4,000 under MSRP) and .9% financing.

  8. Jerad
    | #8

    Wow! Soo many worries about getting ripped off buying a car. But what is getting “ripped off”? Paying a fair price for a car that you like, from a local dealership that respects your business? I’ve been buying from my local dealership for the past 15 years and they always give me a great deal. I inquired about the Costco price for the purchase of my 2012 Accord and recieved an exceptional deal. After discussing the program with my local dealership I came to learn that the real deal is for Costco. The delaership pays roughly $6500 to the dealership each month to be a part of the program. They then discount the cars to $100 to $200 over invoice price. Great deal for the customer, GREAT deal for Costco, not so good for the local dealership working to stay in business! I’m not going to complain about the great deal I got, and will probably use the program for my next car. But look at what Costco is doing… And yes the dealer may get incentives from the factory, but this poor salesperson feels that Costco did absoulutly nothing to help him sell this car? He still had to learn the features, present the product, and do his follow up. And they make all that money for ??? Sorry Costco, but when I learned of this I really had to take a hard look at what this does to our economy.

  9. Jerad
    | #9

    Sean, your comments about dealerships and car sales people show some ignorance or possibly remorse. My neighbor has been selling me Hondas for 15 years. The dealership, sales manager, and the sales person are wonderful people to work with and they work hard long hours. I could comment that doctors, dentists, judges, and police officers are sharks, thiefs, and liars also… really depends on who you choose to do business with I guess!

    @sean

  10. Frank
    | #10

    Just bought a new car on the Costco Auto Program. After checking the dealers invoice through the Consumer Report I sadly discovered it is a scamm. Also Costco promised a $50.00 certificate for service and 15% off parts which they did not deliver on. I was taken by the dealer and Costco.

  11. Holly Golightly
    | #11

    In all dealing with the dealer watch how the destination charge, typically $900+, is quickly added back to any agreed price as a line item in the sales order document. Also, most dealers will add the window etch fee, typically $400, and a doc fee, also about $400. Best to do the dealer on line, get a printed e-mail.

  12. | #12

    @Jerad
    Jerad,
    You are obviously a car salesman/dealer or a complete idiot! If it wasn’t worth it for the dealers to “pay” Costco for inclusion into the auto sales program, THEY WOULD NOT DO IT!!!!!!! They would also NOT sell a car BELOW their cost and lose money! A dealer will come close to a “break even” agreement to move inventory! This “break even” point is where all buyers should negotiate to.

    All dealers mark up their inventory in hopes of getting a huge profit from the suckers out there that can’t/won’t negotiate. Only a fool (like you) would be happy to pay over the bare minimum for any purchase (especially for a BIG TICKET purchase of car/truck)! It is the buyers responsibility to get the best price; just as it is the responsibility of any business to maximize profit!

    Your local dealer must LOVE you; you’re paying off his boat and paying for his vacations! I’ll sell you a car, or anything for that matter, ANYTIME! As a matter of fact, I have a bridge for sale right now…………

  13. Mike
    | #13

    @gene

    I am a sales consultant for a major Toyota store in the pacific northwest. For the record we don’t “mark up”. It’s shady and dishonest. As a sales guy I don’t “love” anybody for paying sticker for a car since I make a minimum commission most of the time anyway (there is very little margin in cars nowadays). I get more value out of getting a new customer and them referring their friends and family to me. I earn a living just like anybody else, people like you are ignorant. It’s sad really. How do you earn a living? ..and paying off a boat and vacations? God I hate people like you so much, why am I the bad guy? WE ARE NOT SCREWING YOU OVER. You’re living in the past. It must suck being so negative. Smile. Personally I would not post something for the world to read if I didn’t know all the facts. You are making yourself look bad posting shit like that.

  14. Rick Skinner
    | #14

    I skimmed through the post and hope what I tell you is not redundant. Costco pricing is hard to beat…sort of. Each Dealership makes it’s own deal. My price on a f150 is $900 below invoice at one Dealership and $1200 below invoice at another. Here is my experienced recommendation: 1. Get referral from Costco. 2. Go to Dealer and get Price. 3. Go to other Dealers and see if they will beat it. 4. Get our vehicle. If you go through Costco ask them to review your deal to make sure the Dealership followed the agreement. If they didn’t Costco will go and get your money. Costco has already fought the battle and I doubt if you are better. Costco can not force the Dealer to accept Costco Pricing. But, once the referral is made and the Dealer accepts the referral, the Dealer is bound. The Dealerships are full of money-motivated people (Liars and Sharks). Costco is your ally and the Dealership hates Costco for a reason. This information is gathered from Costco, Dealerships, Salesman and my own experience of late.

  15. John
    | #15

    went through costco auto purchase program for a 2013 camreo at Smithtown Chevrolet, St, James NY and was told $100 over invoice(about $1000.00 off msrp), said great write up the sale as a 3 year lease on that price, they added $2780.00 to the MSRP of $25,655(2LS Coupe) and used that for the cap cost(minus $500 GM rebate).I have contacted GM & Costco Auto Purchase Program Executives……all I can say is buyer still has to beware and not get lulled into a false sense of security under this Costco program(bait and switch is alive and well)…….I hope costco is good on their word of kicking these types of “stealerships” out of the program. I think all sales should take place at a costco store office and all transactions should be controlled by car headquarters, reviewed by a costco finance person.the problem is the good name of costco vs the scummy reputation of car dealers…..costco needs better internal control.there is a flaw in this program as it now stands.

  16. nadene borsvold
    | #16

    I want to buy a Rav4 2013.

  17. Joe
    | #17

    I spoke to a Mazda lease manager on 2/23 about leasing a vehicle. This dealership is a participant in the Costco auto program. I stated exactly what vehcile and trim I was interested in and my target monthly lease payment. The manager stated that the Costco price for the car is the invoice price. So I’m thinking, great! This will reduce my capital cost, thus reducing the monthly payment. The manager stated that he can provide me with a break-down of the costs (i.e., vehicle price, taxes, fees, etc..). I requested that he send me an email with the figures, so that I can review them. The manager stated that at the moment he couldn’t, because the computers were down (red flag), and that he will send me the information no later than Monday, 2/25. It is now Tuesday, 2/26 and no email. SCAM

  18. Bryan
    | #18

    One word. Useless. After seeing the Costoc “deal,” I made a better one. It was not hassle free or exclusive or anything. What it did do was take me to a dealer farther from my home and one that I would not have considered. So kudos for the dealer for being part of the “Costco program.” It got me in their dealership, but, no it’s a waste. Total fail. Just do it on your own.

  19. Joe
    | #19

    Update (see post #17). After being contacted by several more sales people at the same dealership and to know avail, the final sales rep. was forthcoming with all of the information that I requested (i.e., money factor, depreciation, etc..) documented in an email. No sales pitches or surprise add-on fees. We negotiated a price and completed the transaction, which was for leasing a Mazda CX-5. The deal was very good, however, with some persaverence, as similar deal could be had at a nonparticipating dealership. I do think the costco program saved me a little time on negotiating, though.

  20. jamesp
    | #20

    I used them yesterday, March 30, 2013, regarding a 2013 CR-V. I found the experience a complete rip-off and a far cry from the consumer reports free program (you may need to be an online subscriber, but no additional cost.)
    And I love Costco. They are the best when it comes to quality, service and standing behind what they do and sell. That’s why I was so disappointed.
    I completed the forms and was contacted by Concord Honda.
    I was told that “Our agreement with Costco will not allow us to quote the special costco price unless you are here in person.” That was disclosed on the website, so can’t claim misleading. However, my first point of wondering…..going in to the dealer to find out the price is always a warning sign….they are getting you to commit your time to get to first base.
    Told him what I was looking for, and he came back saying they did not have that in stock, but would try to locate for me. I told him fine, if they could get it, I would go down there. Told him I was ready to buy that very day.
    When he called back later and said they could have the car there tomorrow I just needed to come down to get the price, I told him what I had been quoted by a different dealer (from the Consumer Reports program.) His answer was “I really wish I could tell you what our Costco pricing is, but I can’t.” I figured we were in the ballpark, so told him I would be down there in 10 minutes.
    Upon arrival, he not only looked at my Costco card (which was disclosed on the website as necessary to make sure I was qualified for the discount) he took the card and copied it. So he copied my American Express credit card.
    Costco, do you really feel that is appropriate, having them take a photocopy of my credit card, front and back?
    Turns out the Costco special price, which they claimed was “invoice”, did not include the $830 delivery fee which is printed on the sticker. So, he was offering me a car for $830 above what I had told him I had been offered by another dealer. I showed him the email from the other deal, which detailed exactly what was included and what was not included in their quote. And it specifically included the $830. He shrugged and said it didn’t include it from them.
    So having wasted both of our time, I got up and left.
    Good News is that I bought the car from the Consumer Reports dealer. Saved the $830 (a lot on a $30k car) and it was a much more professional experience. No need to go into the dealer to find out the “secret exclusive” price, much more transparent overall, and cheaper.
    Will never use Costco auto buying again, and it is one (if not the only time) I have been disappointed like this from Costco. They are world class when it comes to transparent, high quality, value-priced offers. Everything about them screams integrity. Except for this program.

  21. mario
    | #21

    I tried the costco program for a Prius V Five and I got decent quotes. 26k to 27k. However I was able to find a better deal on my own. 25.5k at Stone Mountain Toyta in GA.
    I used Dialbit.com where I could install a program which sends any phone number from my computer screen directly to my smartphone’s dialer. Nice not to have to dial by hand. I used it when calling about cars for sale off Autotrader or Craigslist etc.

  22. Ron Pennock
    | #22

    I found jout real quick this program stink!!! The dealer 2 days before offered me a $2000 factory discount and a $1400 dealership discount for total of $3400 including destination charges. Went to a diifferent location of the same dealership in the area with costco the sales person laughed at me and told me they would give me $1000 off or if I wanted their dealership discount it would be $34000 plus 5 year road side warranty and a $1700 warrenty extension to bring the total to a 5 year bumper to bumper and 100000 7 year drive train warranty. Costo needs to reevaluate the program

  23. Mattie Mae
    | #23

    If you are using the Costco pricing, you need to go through the Costco web site and receive a quote from the dealer to compare before you go. They usually send the names of. 4 or 5 so you can compare.

    There are some disreputable dealers that will state they are part of the program and there are some web scams that have done spoofing and set up links that are not Costco.

    You need a membership card to use the pricing it works like fleet pricing and if you are buying a new car they ensure you – the buyer get the rebate monies that are intended for you. The dealers gain by picking up customers that may have never come in and volume. They can also market and create a great customer service atmosphere and make money on the service contracts an subsequent service fo the vehicles.

    If you don’t want the hassle, want all the rebates and a fair price, Costco works.

    Unfortunately a lot of us don’t know how to find a reputable dealer and would just like the piece of mind it did not cost us an arm and a leg . It is sort of like health insurance, you need some leverage to get fair pricing and stop the pain points.
    H

  24. | #24

    True car (dot) com is better. I went shopping for a fully loaded 2014 Subaru Forester and the Costco discounted offer was $500 over invoice. After putting some pressure on them, I got them down to invoice price. However, True Car got it down to $700 UNDER invoice, and with some further haggling, I got it to $1300 under invoice. Costco may offer deals with other makes and models, but I could haggle much better than what they could get me.

  25. Joe
    | #25

    @ Kyle L.

    We purchased a Mazda CX-5 through Costco a few weeks ago. We got a price of $100 over invoice-no haggle. What we also got was essentially locked in the back room with the “finance manager” for an hour after we had already signed the papers (which she was holding). She told us she was “required” to give us information about add-ons, even though we said we weren’t interested. Occasionally I would ask her to move on; she would say “absolutely” and continue on with her spiel. This completely ruined the buying experience for me and I hope to never buy another new car.

  26. Chris
    | #26

    I just purchased a new 2014 vehicle and I used the Costco program to help get a good deal. I didn’t actually purchase the car through the Costco program but I took advantage of the program to start the process and get a better price. Here is what I did and learned:

    I submitted three requests through Costco using three different zip codes. This sent my quote request to three different dealers. One got back to me within 20 minutes with a detailed quote that was $500 below the invoice price. The quote included a copy of the invoice. Now I had a starting point.
    I requested additional quotes online from other dealers in the area and three came back below the Costco quote and a bunch were over.
    I sent an email back to the dealer with the Costco quote and told him I had three quotes better than the Costco price. I asked if he could beat the best quote I had received. He came back with a quote that was around $400 better than the previous best quote.
    I then used that quote to try to get a better deal with the other dealers. I received replies from all three dealers but no one could come within than $200. One of the competing dealers actually told me the quoted price was below dealer cost , even after dealer incentives, and if it was a real offer and there were no shenanigans it would be the best price he had ever seen on the car and I should jump on it.
    I then went to the dealership and meet the salesmen who provided the Costco quote, and then bettered it. We looked at number of cars to decide on the color; he had the keys for 6 cars ready and waiting for me. My wife took a test drive. There was not added pressure to upgrade to a different model or add on accessories. The price was the quoted price, no shenanigans.
    In the end I bought the car from the dealer who gave me the Costco quote but it was not purchased under the Costco program. I beat the Costco price by over $1000.

    The Costco Program won’t necessarily get you the best price but it will get you a competitive price compared to walking in to a dealer and haggling. If you want to get a decent price and don’t want to take the time to try and get a better price, it’s not a bad program. But you can get a better price if you want to talk the time and use the internet and email to negotiate.

    I’m happy with the experience. This is my third new car purchase in five years and it’s the first time I didn’t have a nagging feeling I could have done better.

    Now I have to deal with the auto insurance sharks.

  27. Bill Askew
    | #27

    Buying a car is simple today. First, Go drive what you think you want to buy. Then go to Edmunds.com to check out the car and decide on what options you want. Edmunds will tell you what the average price that users paid for that car.

    IMPORTANT:

    Then send an email to three of the closest dealers of the car you want. Ask them for their best internet price. Then you have three quotes and the Edmunds price to compare. I’ve bought my last four new cars this way. It works with no Hassles.

  28. Roofus
    | #28

    I have a fair amount of experience buying and ordering new vehicles from a consumers standpoint. The very first thing that any buyer or perspective buyer should understand is that the term “Dealer Invoice” is a term that the new car industry created to imply to the consumer that this magic number is what the dealer actually paid for the vehicle. This is absolutely not true, and if a salesperson or a sales “manager” tells you otherwise, he’s not being honest with you. It’s a marketing tool that is used industry wide in an attempt to fool the public into believing that they are getting a “one time super deal” if they only pay “Dealer Invoice” for a vehicle, when in fact there is already a substantial profit built into the “Dealer Invoice” price. You will hear the term “$100.00 over invoice” frequently, that’s an additional $100.00 over the already built in profit of the “Dealer Invoice”. The fact of the matter is that ALL dealers in the entire country pay EXACTLY the same price for any given vehicle, whether the dealer is across the street from the assembly plant or in Fairbanks, Alaska. There may be a very slight difference in the shipping price that they charge but that price will be posted on the window sticker, it’s generally less than $50.00 from one location to another, and again, the dealers are making a profit on what they charge for shipping as they get a fleet rate for the volume of business that they do with the transport companies. Bottom line: Car dealers ARE NOT going to sell you a vehicle unless they make a generous profit, and they will look you straight in the eye and lie to you about how much profit they are making. Watch out for “high rollers” in the game as well, these are sales people who work strictly off of MSRP, meaning that their starting point is always MSRP. As a buyer, you always start low and go up, as you can always go up, but you can’t go back down once you’ve started high. If you find yourself up against one of these, go to another sales person or find another dealer. Play one against the other, they will do it to you in a heartbeat. It’s an extremely slimy business, and these sales people/dealers need to be reminded from time to time that the money belongs to the potential customer until he signs on the bottom line, and that customer can spend his money anywhere he so chooses.

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