Costco Auto Program aims to partner with automakers to offer more promotions on used vehicles as new-vehicle availability remains limited.
For years, retailer Costco’s auto program has worked with several automakers to offer incentives on new cars and trucks to Costco members through a network of more than 3,000 participating franchised dealerships.
In August and September, Costco Auto Program offered a $1,250 discount with Volvo on that brand’s certified preowned 2019, 2020 and 2021 XC60 and XC90 vehicles. It marks the “first time an OEM has participated and marketed their CPO offerings” through the program, said Jay Maxwell, the program’s general manager of strategic partnerships.
The Costco Auto Program has been trying to land such a CPO partnership for years. A Costco executive told Automotive News in 2019 that talks were ongoing with several automakers about using the program to drive sales of certified and incoming off-lease vehicles.
It’s not clear whether those earlier conversations were hindered by the onset of the coronavirus pandemic. Maxwell told Automotive News in August that Costco executives regularly discuss with automakers potential partnerships on incentives, including on CPO vehicles. But in 2022, as dealerships in the Costco network continued to grapple with limited new-vehicle allocation, Costco Auto Program revisited expanding incentives to used vehicles, he said.
Volvo had been the first automaker to partner with Costco Auto Program on a new-vehicle incentive with structured pricing in 2007. Since then, the two companies have offered roughly 12 different vehicle incentives, Maxwell told Automotive News. And both parties came to the same conclusion in 2022, he said: Why not design an incentive program for CPO vehicles, which are desirable to buyers and not nearly as scarce as new cars?
“Our dealers are no different than what dealers are experiencing in general [with] inventory availability,” Maxwell said.
It made sense to partner with Volvo on such an effort, Maxwell said, because the automaker and Costco Auto Program already had that “very good working relationship.” Volvo’s vehicles also are a popular option for Costco members — typically the No. 1 or No. 2 luxury brand that they request, he said.
Offering those members deals on used vehicles is not new for Costco, however. The program has long offered prearranged member pricing on certified used vehicles through approved dealerships in its network. Costco’s first used-vehicle programs launched in a few markets in 2006.
If the new Volvo CPO promotion matches the success of its other promotions, it seems reasonable that Costco would strive to offer other automaker-specific CPO incentives, Maxwell said. He did not disclose other brands that Costco Auto Program may already be working with to develop such incentives.
“We have conversations with all of our OEM partners about all of our offerings, and with this being a new offering, everybody’s taking a peek,” Maxwell said.
Maxwell described 2021 as Costco Auto Program’s best volume year. Members bought more than 775,000 new and used vehicles through the program in 2021. That compares with more than 689,000 vehicles sold in 2020. About 20 percent of vehicles sold each of those years were used.
Member requests for used vehicles grew approximately 2 percent year-over-year in 2021, according to Maxwell.
Even with the new-vehicle shortages, which have pushed the industry’s vehicle incentive spending way down, the Costco Auto Program continues to partner with automakers to offer promotions on select new vehicles. For instance, Costco members who last month purchased or leased a new 2021, 2022 or 2023 Chevrolet Silverado 2500 HD or 3500 HD were eligible for $1,000. Members who bought or leased certain new 2022 or 2023 Audi models were also eligible for prepaid scheduled maintenance packages.