Can Costco Become the Largest Car Dealer in America?

Costco auto program

Costco doesn’t sell cars, but it’s the second-biggest car dealer in the country.

That’s an oxymoron that’ll make your head explode, especially when you consider that the only organization to move more metal than Costco is AutoNation.

Costco’s wildly popular car buying service has been used by hundreds of thousands of people over the years, most of whom chimed on our blog post questioning just how good a deal Costco offers when it comes to cars.

Of course, it’s not possible to walk into Costco and drive out in a new car. The service is really just a middleman between the dealer and the consumer.

When you purchase a car through Costco, you’re buying from a dealer at a price reserved just for Costco members. One article says:

Costco doesn’t sell cars per se. Working through an auto-buying service called Affinity Auto Group, the $112.6 billion retailer uses its purchasing power to negotiate discounts for its more than 45 million U.S. cardholders. Costco’s huge scale gives it the clout to insist that local auto partners that sell through Affinity beat rivals’ prices. Ken Ryan, who runs a GMC dealership on Long Island, says Costco’s tough negotiations mean buyers save as much as $1,000 per vehicle.

I still believe a savvy negotiator can meet or beat the Costco price, but that’s really not the point. The point is that Costco offers a set no-haggle price that works for the dealer and the buyer. As an added bonus, Costco sometimes offers a $500 in-store cash card for buyers who complete the purchase of a new car or truck.

Last year nearly 400,000 people took advantage of this simplified car-buying process, which would place Costco behind AutoNation’s 533,000 sales. Clearly, people love the idea of getting a decent deal without the hassle of negotiating.

If Costco becomes the number one “dealer” in the U.S., the traditional model of selling cars might need a thorough re-examination.

Next time you buy a new car, will you shop through Costco or try to negotiate a better deal yourself?

-tgriffith

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