Costco Sold Almost 400,000 Cars Last Year

Costco was responsible for the sales of nearly 400,000 new vehicles in 2014. According to Automotive News, Costco referrals were responsible for 398,875 vehicles sales last year. Costco teams up with one dealership per brand in their area and provides referrals through the Costco Auto Program. The program is exclusive for Costco cardholders and is marketed as a no-haggle sales approach. Consumers reportedly use the program because they don’t want to negotiate with dealers over price.

However, with nearly 400,000 deals done in 2014 as part of the program, certainly some of those consumers thought that the price given was the final price, only to later realize that other finalization additions such as tax weren’t part of the estimate. After all, the fine print of the Costco program reads, “Prices do not include sales tax, vehicle registration fees, finance charges, documentation charges, or other fees required by law. Factory invoice may not reflect dealer’s actual cost for a vehicle.” Whatever minimal change the final sales price may have from the estimate from Costco, the program is a success.

Automotive News interviewed a dealer out of Texas, Jim DiMeo, General Manager of Charles Maund Toyota who said that Costco Auto customers provide repeat business. “After they buy a car through Costco, they’re coming back to patronize the service side of the business. They’re very loyal customers,” Dimeo said.

What makes the Costco program different from that of other referrals is that consumers can sign a deal at Costco for the vehicle and go to the dealership to finalize the sale and pick it up the vehicle. Costco negotiates discounts for its members through Affinity Auto Group. With lower than MSRP prices available, the program has become very popular. According to Bloomberg, since 2008 there has been a 99 percent increase in the amount of auto sales arranged by Costco. In the forth quarter of 2014, GM arranged a $500 gift card promotion in conjunction with the Costco auto program. The result was 43,300 vehicles sold through the program. That’s good enough for 6 percent of all domestic sales for GM during that quarter. One may wonder how much money Costco is making on theses deals; the answer is that they make…nothing. Costco reportedly arranges the deal with local dealers to retain and attract new Costco members.

What do you think about the Costco program? The company makes nothing per deal and arranged nearly 400,000 sales last year? How do you compare their referral program to third party programs, which promise no haggling for the consumer, but cost money per lead? Do you think that the Costco program will be more successful this year?