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Marketplace Morning Report

Another Costco bonus for members: discount cars

Annie Baxter Jun 11, 2015
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Nearly 50 million Americans pay an annual fee of $55 to $110 a year at Costco so they can stock up on giant packages of steeply discounted paper towels or even bargain-priced jewelry.

But a growing number of Costco members are also turning to the company to score a ride. Costco has become a major player in the world of car sales. The retailer says it helped move about 400,000 cars last year.

“Costco is essentially acting as a middle man,” says Jeff Schuster, senior vice president of forecasting at LMC Automotive. “They are working with the manufacturers to bring in vehicles and essentially set a price for the vehicle.”

Costco negotiates price discounts that can save members $1,000 on average.

“So their members then don’t have to haggle,” Schuster says.

John Rand tracks Costco at the research firm Kantar Retail. He says Costco offers special opportunities like brokered car purchases and even vacations because it’s focused on growing and retaining its membership base. Rand says 80 percent of its net revenue comes from member fees.

“Costco is in many ways not really a retailer,” he says. “They tell you what they are: they’re a club … and as a club their mission is constantly to provide something extraordinary to members.”

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