Costco is selling more cars than ever before by offering one key perk

costco carsPeople fill up their tanks with gasoline at a Costco Gas Station in Carlsbad, CaliforniaReuters

  • Costco's auto program sold more than 520,000 cars in 2017.
  • The budget retailer grew car sales by 6% in a year when the industry's sales slumped.
  • Costco's biggest advantage over competitors is that it has fixed prices, meaning customers don't have to bargain when making their car purchase.

Costco's car business is thriving thanks to a perk that sets it apart from the competition.

On Tuesday, Costco announced that its auto program sold more than 520,000 vehicles in 2017. That's a 6% increase over 2016 sales figures, during a year when total sales dropped across the wider auto industry.

Costco membership shopping cartSavings at warehouse stores like Costco may not be worth it.Damian Dovarganes/AP

Costco's auto business has quietly skyrocketed over the last decade. In 2008, Costco sold roughly 200,000 cars a year - a figure that the retailer has more than doubled since then.

Despite the growing business, Costco doesn't make any money on the auto sales.

The vehicles are sold through partnerships with auto dealers, meaning that, technically, Costco itself does not sell the cars. Instead, the retailer uses the program as a way to attract new members and maintain existing members' interest.

Costco has one major perk that traditional car dealerships lack: fixed prices. That means customers can skip the bargaining and upselling that is expected at traditional auto dealers.

"Costco members are at the forefront of everything we do," Beth Chaponis, a Costco representative, said in a statement explaining the company's "exceptional and transparent car-buying experience."

The streamlined process means greater customer satisfaction. Costco surveys every member who buys a car though the program. According to the company, more than 96% of members who responded to the survey gave the program high marks for value, service, and overall experience.

Costco launched its auto program in 1989. Today, the retailer sells cars through more than 3,000 dealerships to Costco members across the US.

The Future of Retail 2018 by the BI Intelligence Research Team.
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