Would You Buy A Used Car From This Company? Costco Wholesale Corporation (COST), Carmax, Inc (KMX), AutoNation, Inc (AN)

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If there’s anything I hate more than filling out paperwork, waiting for hours, and dealing with aggressive salespeople, it’s buying a car, which manages to combine all three.

Would you like a test drive?

Costco Wholesale Corporation (COST)Several companies have been trying to win my kind of business: that of people who hate the nonsense that traditionally goes with buying a car–especially that feeling that you’ve been taken for a ride. Chief among these are Carmax, Inc (NYSE:KMX) and AutoNation, Inc (NYSE:AN). CarMax sells used vehicles with no-haggle pricing, and undoubtedly you’ve seen their commercials. The ads also promise that the cars are thoroughly vetted with detailed service and accident records.

Cars that don’t meet their standards are sold by wholesale auction to licensed dealers. The 20 year old company operates 118 superstores in 58 markets and has sold over 4 million cars. Carmax, Inc (NYSE:KMX) trades at a 22.65 P/E with a 1.82 PEG.

AutoNation sells new and used cars, but doesn’t have its own financing arm like CarMax, although third party financiers are all too happy to help. AutoNation, Inc (NYSE:AN) calls itself America’s Largest Automotive Retailer. It operates more like a traditional dealership with auto service, parts, and maintenance. It also offers cash cow extended service warranties, as does CarMax.

AutoNation also offers CarFax reports and certified pre-ownership papers, and a low price upfront policy. The company has 210 domestic and import franchises in the US and offers an online shopping option (so does CarMax).

AutoNation is down only 10% from its all time high of $48.45 in October. From its founding in 1999 it only took 12 years to sell 8 million vehicles. In terms of corporate transparency, AutoNation, Inc (NYSE:AN) was the first auto dealer to report monthly sales starting in 2010. It sold 21,168 new cars in February.

One of the biggest shareholders in AutoNation is Eddie Lampert and his ESL Partners, which took a 24% stake in the company in 2001, and which holds 32,367,876 shares respectively. AutoNation is trading at a 17.51 P/E.

I’ll even throw in a case of detergent!

Then there’s Costco Wholesale Corporation (NASDAQ:COST), the same place where you can buy everything from fine art and wine to cases of detergent.  Now you can also buy cars! If you know anything about Costco, you know that they are extremely discriminating about whatever they associate with their name.

The process is almost as simple as these other retailers once you have your annual membership card. You go online, research what you want on the Costco site (pre-owned or new), locate a dealer who has it, and the Costco approved dealer will contact you. Then you just check out the car and write your check.

Why would someone prefer to do it this way? The pre-negotiated Costco Wholesale Corporation (NASDAQ:COST) price can sometimes be below that of the Kelly Blue Book, and manufacturer’s rebates and incentives are valid with the program. Actual online responses from people who used the program, whether as a jumping off point of negotiating with the Costco price at a different dealer or whether they just went with Costco, are somewhat mixed. The ones who really love it are those whose wives hate the haggling.

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