The Costco Auto Program is a great way to buy a new vehicle. It takes the hassle and stress out of this often torturous process by guaranteeing a low price and unprecedented levels of service.
The program had a record year in 2015, with sales growing by nearly 16.8 percent compared to the year prior.
Helping the program hit this milestone, the company ran a special holiday promotion along with General Motors. This bonanza began on October 2, 2015 and ran until January 4 of this year.
It gave customers supplier pricing in addition to all qualifying manufacturer rebates and incentives on select Chevrolet, Buick, GMC and even Cadillac vehicles. Depending on your region, this could include bonus cash and special financing rates.
Beyond this, the offer was open to many GM dealerships in addition to ones that are usually allowed to participate in the Costco Auto Program. Normally they only allow certain stores to sell vehicles to their members.
Aside from broadening the availability, Costco also offered buyers special gift cards if they completed a satisfaction survey following the purchase of a vehicle. Participants received $300 or $700 depending on what tier of membership they had.
This is an impressively generous deal and one Costco’s customers really took advantage of. Compared to a similar promotion that ran in 2014, sales increased an impressive 34 percent with more than 58,000 cars and trucks delivered.
Responding via e-mail, Honey Mae Kenworthy, director of corporate communications for the Costco Auto Program said, “The 2015 GM Holiday Sales Event holds the record for all our limited-time offers.”
Curiously, more than half of Costco members who purchased a new GM vehicle through the Holiday Sales Event did so because of the deal, meaning that aggressive pricing really drove sales. Additionally, there were many conquest sales with the majority of these coming from Ford, Toyota and Honda, respectively.
A Sound Way to Buy
Since it debuted more than 25 years ago, the Costco Auto Program has experienced slow and steady growth. One reason for this is that it’s “a painless way for people to purchase a car,” said Dave Sullivan, analyst at AutoPacific, who’s been a Costco member himself for 10 or so years.
One of the reasons for this ease of use is “pre-negotiated pricing,” explained Sullivan. Costco works with select dealers to give its members the best value possible. Essentially they do the haggling so you don’t have to, which saves a ton of time and stress.
“And if you can apply that to any brand that’s great, whether it’s a Jaguar or a GMC, you can take hours out of the sales [process],” said Sullivan. “That’s valuable time for the customer,” and the dealer as well; it gives them more time to work on other sales that aren’t coming from Costco, which is a win-win.
Since Costco members tend to be more affluent, this can be seriously beneficial for participating dealers. “[It] helps in terms of financing,” said Sullivan. “They’re not coming in looking for a Kia Rio, they’re coming in for a higher-dollar, a higher-ticket purchase.” This can mean more money for participating stores, or at least a solid chance to profit off aftermarket-sales and service work down the road.
However, given the geographic limitations of the Costco Auto Program, this could be hit or miss for certain stores. Only one Ford dealer might serve a particular region or market, meaning a member might have to drive a fair distance to shop there.
“Consumers … may not come back to that dealer if it’s too far away,” said Sullivan. They may be willing to take a hike in order to get a great price, but they won’t necessarily return for service or warranty work he said.
This is one potential pain point for stores, but it’s not necessarily the only one, as Sullivan explained. “I’ve heard that Costco can strong-arm some of the dealers and that sometimes it’s not necessarily a good deal for them, but I don’t know if that’s true or not.” He also noted that, “It’s very hit or miss in terms of brands or dealer groups that participate.” This is because Costco hand picks the stores that are allowed to participate and holds them to the highest standards of customer service and pricing. Simply put, not all brands are available in every market.
Still, the benefits this program offers to members is undeniable. Pre-arranged pricing, a speedy transaction and guaranteed satisfaction are hard to argue with. “I think anytime you can take the pain points out of car sales is a benefit to the consumer,” said Sullivan, and that’s exactly what the Costco Auto Program aims to do.
While he hasn’t purchased a vehicle through them Sullivan’s “always had a good experience” with Costco, whether he’s bought furnace filters or vacation packages.
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