Kelley Blue Book Used Pricing Guide
What is my car worth? It is an extremely common question, and it becomes an extremely important question to you financially whenever you are thinking of buying a new car. Whether you plan to sell your current car or trade it in to the dealer where you buy your next vehicle, understanding the value of your car is critical. You simply can't get the best deal for yourself without having that information at your fingertips. And consumers aren't the only ones who need to know vehicle values. New and used car dealers, banks, credit unions, and insurance companies also need to have that information. For nearly 100 years, Kelley Blue Book has been an acknowledged third-party source of vehicle values, first to the industry and then, in more recent years, to consumer car buyers and sellers as well.
Cars Have More Than One Value
If you ask what your car is worth, you might think the answer would be a simple number — say, $10,000. But in reality, each vehicle has several values, depending upon who is selling and who is buying the vehicle. For example, if you plan to sell your car to an individual — a private party — you can expect to get more money for it than if you plan to trade it in to a dealer. Why? Because the dealer will take the trade-in and turn around and sell it to another buyer hoping to make some money on that transaction. Private-party buyers generally don't plan to re-sell the cars they buy. Because of factors like these, each used vehicle has a trade-in value, a private party value, and a value that the dealer expects to get when the car is retailed to a new buyer. Vehicles also have an auction value, and new vehicles have a manufacturer's suggested retail price (MSRP) that is often the place where purchase negotiations begin.
It is valuable for all parties to have an independent, unbiased source of information for vehicle values because it aids the negotiation and buy-sell processes. Without established vehicle values, each price negotiation would be infinitely more complicated. For almost a century, Kelley Blue Book is one of several "guide book" companies that have provided that information to those who need it — dealers, financial institutions, insurance companies, and, most recently, consumers. For the pricing information to be of use it must be accurate, if not "penny perfect," and it must be credible. All parties to each transaction must have respect for the information if they are going to rely on it as they negotiate and come to a deal.
The Product of Research
Kelley Blue Book values are derived from massive amounts of data, including actual sales transactions and auction prices, which are analyzed and adjusted to account for seasonality and market trends. Because the auto market has significant regional differences, they are also adjusted to reflect local conditions in more than 100 different geographic areas and are updated weekly to give consumers up-to-date used-car pricing information. To gain all the data necessary, KBB uses several key data sources including wholesale auctions, independent dealers, franchised dealers, and private-party transactions. Traditionally, it has relied heavily on wholesale auctions because those auctions reflect information from key sources including consumers, dealers, financial institutions, rental fleets, and leasing companies.
Result of Process
Kelley Blue Book values are not precise. They are estimates, but they are estimates based on a well-established process, giant amounts of data, and generations of expertise in determining and, in some ways, establishing vehicle values. Kelley Blue Book calls it "a proprietary editorial process." It starts with a thorough analysis of all collected data, and it is informed and "leavened" with historical trends, current economic conditions, industry developments, seasonality, and location. The values that result from the process, in KBB's words, "reflect the most current representation of a changing marketplace and are therefore relied upon by a variety of leading organizations as well as the average consumer." The overarching goal is to provide a credible guide in an ever-changing buying-and-selling environment that sees thousands of transactions each day.
Mounds of data are used to produce the values Kelley Blue Book quotes, and it is valuable to know what types of data are used in the process. First, there is market demand. Depending on the area in which the vehicle is being sold, relative demand has a major impact on the used vehicle's value. An individual used car sold in New York may be valued differently than the same used car sold in Iowa. A second criterion is the vehicle's condition. The current state of a used vehicle has a major impact on its value. This, of course, is subject to personal opinion, which is why the values can only be used as a guide rather than being precise. Yet another criterion is the individual car's equipment level — a car with no extras and that same model car with a full array of high-tech and comfort features will have two different values. Finally, there are its age and mileage, which are a proxy for how heavily worn the vehicle is and how close it is to the end of its useful life.
Kelley Blue Book trade-in value is the amount you could expect to receive from the dealer if you traded it in as part of a transaction in which you buy or lease another vehicle. Keep in mind that this assumes an accurate appraisal of the vehicle. In real-world situations, both you and the dealer come to an agreement on the value of the vehicle you are trading in — in reality, selling to the dealer — and that happens at the conclusion of your negotiations with the dealer. It is also important to note that the trade-in-value is very often less than you would receive if you sold the car yourself to a private individual, and it could be more than you'd get if you sold it outright to a dealer.
The Kelley Blue Book used private-party value is what you can expect to pay if you sold the car to an individual consumer. It is also an approximation of what you might expect to pay if you bought the used car from an independent seller. As with all Kelly Blue Book values, the private-party value is a guide. It can change depending on several factors. If there is a warranty attached to the vehicle, the dealer's asking price is likely to be higher than the private-party value because warranty coverage has value. Should the vehicle be in excellent condition, that will drive up the price, because the value is predicated on a vehicle in less-than-excellent condition. It is interesting to note Kelley Blue Book estimates that only 3 percent of all used vehicles are in excellent condition.
Certified Preowned Value
The certified preowned value of a value is a used vehicle value that incorporates the fact that the vehicle is offered with a manufacturer-backed warranty rather than as-is, which is the way the typical used vehicle is sold. As we mentioned earlier, warranty coverage offers peace of mind that customers will pay extra for, so the CPO value is universally higher than the private party value. Retail-oriented values like CPO value take into account dealers' profit, costs for advertising, sales commissions, and other costs of doing business. In the end, Kelley Blue Book used car pricing can serve as a good barometer for buying and selling a vehicle. When used in conjunction with your own independent research, it can ensure that you get a price that is fair.