Is Costco the Best Place to Buy a Car?

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 one in three would rather to go to the DMV or do their taxes than buy a car. This could help explain why Costco members bought nearly 400,000 vehicles through the warehouse club's Auto Program in 2014, 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 $55.

At Costco, members talk to store representatives about what they want and can afford -- to buy or lease -- but they don't walk out of the warehouse with keys to a vehicle. After identifying up to three models they're interested in, members are contacted by nearby dealers within 24 hours and the transaction takes place between dealer and buyer.

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). Depending on a dealership's preference, the price sheet for Costco members may be shared online or over the phone, or members may be required to visit the dealer in person. Costco representatives can also advise members about different vehicles, trim levels, and options packages, with prices for optional factory add-ons clear from the start.

There are about 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, Car and Driver reports that rock-bottom prices are still reserved for those who research, shop around, and negotiate. Reed agrees. The 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. One buyer who shopped the quotes back and forth between dealers was able to beat Costco's price by more than $1,000.

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 and drive off without expensive extras. Costco doesn't negotiate prices for post-factory add-ons such as chrome wheels, nor does the warehouse club negotiate financing (except for boats and RVs). 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.