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Why Costco members get such fantastic car deals

Carol Tice

I'm sitting in a cavernous Starbucks in downtown Seattle listening to Cathy MacCaul rave about her new charcoal-gray-and-black 2010 Honda CRV. She snagged it for less than sticker price last summer through the Costco Auto Program, one of the perks of being a member.

The YWCA community-affairs manager is not just thrilled with the car, which is the first she's bought on her own as a single mom, she was also impressed with the red-carpet treatment she received, her saleswoman's patience while she chose colors and features, the haggle-free sales process, and the speed with which she was able to wrap up the deal – three hours flat.

"You locate a participating dealership through the program by phone or on the website. Then you visit the authorized dealer and meet with the specially trained salesperson who gives you the Costco member price," she explains to me. "They present you with the dealer invoice and the member price sheet so you can see exactly what you're saving. Then, the Costco member price is what you pay. It was incredibly painless," she says. "And I got an incredible deal, lower than Kelley Blue Book listed the car."

This chat left me wondering, "How does Costco get its members those amazing car deals, anyway?" To find out, I chatted with executive vice president Gina Paolino and operations vice president Rick Borg from ADG, a San Diego-based company who partners with Costco to offer the car discount program to their members.

A peek under the hood at Costco Auto Program

The terrific service and great prices Costco members get when they go to a dealership to buy a car are the result of a major behind-the-scenes effort by a 140-person team. I learned:

  • A field group constantly researches auto dealers to make sure participating dealers offer the best service and price for each brand in each city.
  • The auto program maintains a massive database of car prices and dealer customer-service ratings that is constantly updated to make sure the program has the best possible dealers and the lowest prices.
  • To make sure customer service stays top-notch, Costco Auto operatives secret-shop the program's dealers.
  • Another team shops the competition, to make sure participating dealers keep their prices the lowest.
  • More than 200,000 Costco members buy cars through the auto partnership every year.
  • The auto team has deep experience, with some such as Paolino on board since the program began more than 20 years ago.
  • Follow-up is extensive – Costco member MacCaul got multiple calls and emails from the Costco Auto team, checking to make sure they had a great experience and got the Costco price.

Auto Program to the rescue

Even with all the effort made at the Costco Auto Program, occasionally there's a glitch. For instance, when Peter Atwater of Chadds Ford, Pa., went to his local Mazda dealer last summer looking to buy wife Janet a red CX-9, he got some quizzical looks when he asked for the Costco member price.

Atwater's call for help went straight to the program's own call center in San Diego – not some third-party switchboard halfway around the world, as with many other car-deal programs.

His contact called the dealership and got back to Atwater with the name of the authorized salesperson, who'd been out the day Atwater visited. That's right – only sales staffers specially designated and certified by the auto program as knowledgeable in all the program details can help Costco members and offer them the Costco price.

Atwater returned, met with the correct person, and quickly wrapped up his deal.

"The salesman handed me the piece of paper, showed me the Costco member price, and I wrote a check," he says. "This was effortless compared to the usual haggle process."

What a far cry from the typical agony of all-day haggling to buy a car. Instead, Costco members get a quick and easy process and the best deal – thanks to the Costco Auto Program.

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