The Costco Auto Buying Program

You may have also noticed they offer a car buying service called the Costco Auto Program and are wondering if this is a good way to purchase a car.

The way the program works is that Costco has arranged pre-negotiated prices for their members through a network of car dealers. These pre-negotiated prices are based off the invoice - usually $500 above invoice price.

This is basically a marketing agreement between Costco and the dealerships. The dealerships pay Costco a fee of between $300 and $500 for each car that is purchased through the program.

This is where some people feel the Auto Buying program is a bit misleading. Most consumers don't realize how it works and assume Costco is the one selling the vehicles. Keep in mind you still have to purchase the car at a dealership, and could be subject to unethical sales techniques.

For example, you may get a good price on the car, but the dealer could charge a high doc fee and try to sell you add-ons you don't need. You have to keep your guard up at all times. Since dealers pay a fee of several hundred dollars to Costco to be part of the program, you will most likely get a better deal if you shop on your own and use my car buying method.

If however, you're the type of person who hates negotiating and are willing to settle for a fair deal, then the Costco Auto Buying program is a decent way to go.

A couple of alternatives are TrueCar.com - which offers a similar program, and CarWoo - which offers a pure negotiation service with no hidden fees.