Costco Auto Program sees surge in referrals

SAN DIEGO — As microchip shortages have impacted new vehicle supply, Costco Wholesale Corp.'s Costco Auto Program has seen a surge in demand for member discounts on vehicle parts and services.

Costco members can receive a 15% discount coupon for most vehicle parts and services at participating car dealerships and independent repair shops. There are about 50 million Costco members in the U.S.

Costco said it recently has increased its marketing efforts to build awareness for the member benefit and that effort, as well as the new vehicle inventory shortage, has boosted coupon requests by 45% for the first eight months of the year, compared with the 2020 period.

Members are faced with deciding whether to replace their vehicles or continue to repair their older vehicles in the face of new-vehicle shortages, according to Jay Maxwell, general manager of strategic partnerships for the Costco Auto Program.

The coupon "is a great avenue for them, if they choose to repair the vehicles, to get a savings on repairs to keep their vehicle roadworthy."

The Costco Auto Program was created in 1989 to offer referrals and discounts on new vehicle purchases for members at participating car dealerships.

The program began offering the 15% coupon for parts and service in 2011. About five years ago, the program expanded the referral network to include independent auto repair shops.

Members visit the program's website or call to request a coupon each time they need a part or service. The coupon cannot be used at Costco Tire Centers and it cannot be used toward the purchase of tires, air bags, oil changes or state-mandated vehicle inspections. The coupon also cannot be combined with other promotions or incentives at the dealership. The maximum savings per coupon is $500.

Mr. Maxwell said the coupon is not offered for tires since the Costco warehouse clubs sell tires and because of the low margins on tires.

He said the impetus for the 15% coupon was to benefit members who may bring their vehicles in for tires at a Costco store and find they need other maintenance services not offered at Costco. The tech can inform the member of the coupon so they can visit a local participating dealership or repair shop.

On the website, members enter their ZIP Codes and vehicle makes to find a participating service center that specializes in their vehicle brand. It is up to the member to print out the coupon and schedule a service appointment, Mr. Maxwell said.

More than 3,600 service centers participate in the referral program in the U.S. Mr. Maxwell didn't have a ratio for the number of vehicle dealerships versus independent repair shops, but he said the numbers are more skewed to vehicle dealerships who hope to retain vehicle customers after the new-car warranty expires.

To be on the referral list, a service shop must commit to honoring the 15% coupon, and Costco vets the business based on reputation, location, number of bays, waiting areas and other criteria.

"The benefit is gaining access to work with Costco members in their immediate area. It's another way of getting their name and offerings out in front of the member, gain potentially new customers, gain retention customers and keeping their absorption rate as high as possible," Mr. Maxwell said.

"All repair centers, for the most part, are always looking for ways to keep the bays filled and their shop employees working."

The service shop doesn't receive reimbursement from Costco for accepting the coupon; rather the benefit is attracting and retaining new customers, Mr. Maxwell said.

"We figure a lot of people need maintenance as their cars get older and that's one of the biggest challenges (car) dealers have is maintaining people with older vehicles when they get out of the warranty period. So this is a great way for a member that comes back in with a vehicle out of warranty. You retain that member.

"And then the other benefit is that by retaining that member, they're going to continue that Costco relationship and when they're ready for that new vehicle, (the dealership) can sell them a vehicle through the Costco program. So it's a complete life cycle," Mr. Maxwell said.

The parts and service program is nationwide in the U.S. only, and Mr. Maxwell touted that "there is a (participating) service center available within 10 miles of about 98% of the Costcos in the U.S."

Mr. Maxwell said the company is always looking at ways to increase member awareness of the program and it will continue its digital marketing efforts through 2022.

Going forward, Mr. Maxwell said, the company is considering expanding its offerings beyond the blanket 15% discount.

"We're looking at ways we can offer individual specials on a service or things of that nature."