When most people think of Costco (NASDAQ:COST), they picture its warehouses full of items sold in bulk alongside random clothes, the occasional 8-foot Teddy bear, and maybe rows of electronics. There's also, of course, a large pharmacy section, select furniture, an area devoted to eyeglasses, a food court, and often a liquor store.
While there may be an auto supplies shop that sells things like tires and batteries, there's no car dealership. That does not mean, though, that the warehouse club isn't in the car-selling business. The company’s auto-buying service, Costco Auto Program, allows members to buy or lease cars at discount prices year-round.
For the holiday season, the membership-based retailer plans to step up that program with special deals on new 2018 or 2019 Chevrolet, Buick, GMC, and Cadillac vehicles. The nationwide deals on these General Motors (NYSE:GM) brands -- which are being offered for sale or lease -- have already begun, and they will run through Jan. 2, 2019.
How does it work?
Costco's Auto Program offers prearranged pricing on new and used vehicles through a network of participating dealers. To take part in the holiday sales, event shoppers have to meet a number of requirements.
First, if you're not already a Costco member, you're not eligible. Current cardholders for the warehouse club must then register at CostcoAuto.com/GM for the 2018 and 2019 model year limited-time specials. After that, the customer will receive an email with an authorization number allowing him or her to buy or lease a car at the special pricing by Jan. 2, 2019.
The program has been a big success for Costco. It drove a 49% increase in unit sales over the holiday selling period in 2016, according to a press release from the company.
"For the last several years of the holiday sales event, Costco Auto Program worked with General Motors to deliver special pricing for Costco members," said Costco services director Mark DerGarabedian in the press release. "This latest event is no exception."
In addition to promotional pricing, Costco members who participate in the holiday sales event also get some added incentive in the form of gift cards. Executive members who buy or lease a 2019 car will receive a $700 Costco gift card, while Gold Star and Business members will get a $300 card. Buying or leasing a 2018 vehicle will earn a $500 Costco member-only incentive that can be combined with "compatible GM incentives for which the member qualifies."
Why buy a car from Costco?
The warehouse club takes the mystery out of the process and frees customers from having to negotiate with a dealer. It also keeps the consumer from having to deal with the pressure that's often applied during the sales process.
This program allows Costco members to buy a new car at a good price with no fear that they're being taken advantage of. Maybe some savvy buyers might do better on their own, but for most people, this is a smart way to buy a car where you know you're getting a pretty good (maybe even a very good) deal.
For Costco, this is a smart way to offer another membership perk.