Costco discount aims to spur service, vehicle sales
Newbery: More dealer revenue opportunities
Warehouse club giant Costco has negotiated a 15 percent discount on parts, labor and accessories for its members when they have vehicles serviced at participating auto dealerships.
Jim Newbery, executive vice president of Costco's auto program, says the program gives dealers access to the buying power of Costco's 44 million members who bought more than 250,000 new and certified used vehicles in 2010 through Costco.
"It's an adjunct to the certified pre-owned business," Newbery says of the service program that began its national rollout in May. "Those cars from the get-go have mileage on them, so you're not talking about just doing warranty work. There is immediate business. When cars are new or used you have the accessories business. Our members come first but we want the dealer to increase his revenue opportunity."
Jeff Brandfon, owner of Brandfon Honda in Branford, Conn., expects the program to create 500 to 600 customer-pay visits a year to his service department and some new and used vehicle sales.
Brandfon, a Costco participating dealer for more than five years, signed up for the service program last summer.
Since 1989, Costco has arranged no-haggle, new-vehicle prices with cooperating dealerships on behalf of its members. In 2008, it added factory-certified used vehicles to the program.
Costco's auto program involves about 2,500 dealerships. About half participate in the parts and service discount program.
Costco piloted the parts and service discount program for two years starting in late 2008. About 200 cooperating dealerships took part in the pilot, Newbery says.
The company added dealerships and has signed up 1,200. It expects to sign up the rest of its 2,500 participating dealerships by the end of 2012.
Newbery says that from May to June, Costco referrals for parts, accessories and labor to dealers increased 19 percent. Referrals for new and used vehicles, year-to-date through mid-December, are up 18 percent over last year, Newbery says.
Newbery says the program does not allow members to combine the 15 percent Costco discount with a dealership-sponsored discount or special program.
Oil changes were part of the initial pilot program but were later dropped because many dealers already heavily discount the service, Newbery says.
Costco, of Issaquah, Wash., has 433 warehouse stores in 40 states plus Puerto Rico. Members pay annual fees of $55 or $110 to shop for a range of products at discount prices.
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