(NEXSTAR) — When your gas tank is nearing empty, you may opt for a gas station where you can redeem rewards, or at least one with the best snacks. Or maybe, you’re driving to your nearest Costco and Sam’s Club for the slightly cheaper prices at the pump.
But how can those warehouses keep their prices so much lower than your other favorite fueling spots?
It’s largely because they’re “willing to take less margin” in exchange for bringing people to their stores, Patrick De Haan, the head of petroleum analysis for GasBuddy, recently told Nexstar.
Essentially, Costco and Sam’s Club use “gasoline as the catalyst to get people” to their warehouses, he explained.
“They want to draw you to the location, because often when you’re filling up gas at Costco, you’re like, ‘Well, I might as well go in as well, you know, I need a couple things.’ Then people go in and end up spending more on higher margin items.”
De Haan continued, noting that the retailers aren’t losing any money on gas.
Costco’s beloved hot dog combo works in relatively the same fashion. Since the hot dog and soda meal was introduced in the mid-1980s, it has maintained its $1.50 price tag. As long as customers are coming into warehouses and shopping for other higher-priced items, the hot dog and fountain soda is a worthwhile promotion for Costco. The same can be said for its rotisserie chicken.
The volume of gasoline Costco and Sam’s Club warehouses purchase also helps to offset the costs, oil industry consultant Andrew Lipow previously told Nexstar’s NewsNation.
De Haan previously told Consumer Reports that gas at warehouse stations is typically anywhere between 5 cents and 25 cents cheaper per gallon than at other nearby gas stations.
“And when prices rise, they hold their prices down for longer,” he added.
While the prices may be relatively similar between the two companies, the type of gas varies.
Both offer unleaded, premium, and diesel fuels (here’s how to know which you should be getting), only Costco offers Top Tier fuel.
The fuel, according to Top Tier, is intended to keep engines cleaner by reducing deposit buildup on injectors and intake valves. A 2016 study by AAA found that Top Tier gasoline keeps engines 19 times cleaner.
“Yes, Top Tier gas is worth the extra money,” CarFax reported. “The benefits are not a myth.”
