Every used car is different, so it can be hard to agree on its worth. A dealer, a buyer and a mechanic may all have a different opinion, so what should you do?! Often, the answer is to introduce a third-party opinion; many do this through Kelley Blue Book. Let us tell you why!
What Is Kelley Blue Book (KBB)?
Kelley Blue Book has been an independent source of vehicle values since its founding in 1926. The fact that it is an independent source of information is important because the value of any new car is dependent on several factors. An unbiased source of information is important in helping both buyer and seller agree on a vehicle’s price. Without an established, independent source of vehicle values, each used car price negotiation would be infinitely more complicated.
Used car price information is important to consumers and used-car dealers, and it is also important to others who need it — financial institutions, insurance companies, and governmental agencies.
Why KBB Is a Trusted Pricing Source
KBB is a trusted pricing source because it uses predictive analytics together with industry and field analysis to review trends and provide the most up-to-date market-reflective information.
How KBB Collects and Analyzes Data
KBB 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 over 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 they reflect information from key sources including consumers, dealers, financial institutions, rental fleets, and leasing companies.
KBB used car values are not precise, and KBB doesn't claim they are precise to the penny. It acknowledges that it is a "guidebook" and that the values it published are estimates. But they are not "stabs in the dark" either, 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. KBB calls it "a proprietary editorial process." One key thing to remember is that the used-car values don't have to be perfect to the dollar to be useful to all the entities that need pricing information. Instead, they simply need to be close enough to give the buyer and seller a common understanding of the limits of the transaction.
Key Used-Car Valuation Criteria
Immense amounts of data are used to produce the values KBB quotes. First, there is market demand. Depending on the area in which a vehicle is being sold, the relative demand has a major impact on its value. An individual used car sold in New York may have a different value — or a different price — than the same used car sold in Iowa. A second criterion is the vehicle's condition. For each used car, the wear and tear it has experienced has a major impact on its value. Assessing wear and tear is often a matter of personal opinion, which is why the used-car values can only be used as a guide.
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 is mileage, which is a proxy for how heavily worn the vehicle is and how close it is to the end of its useful life.
How Kelley Blue Book Determines Used Car Values
Factors That Influence a Car’s Value
Many factors influence a car’s value, which is why there’s no one-size-fits-all method for valuing a car. Here’s a list of just some of the things that can influence a car’s price:
- Condition: A used car’s condition, both interior and exterior can have a huge impact on its price tag. Well-maitained cars tend to be more valuable. Similarly, cars with a full-service history will usually have a higher price.
- Mileage: In most circumstances, the lower the mileage, the more expensive the car. This is because low mileage usually equates to less wear and tear.
- Location: Geographic demand can have a huge impact on its price. For instance, compact cars may be valuable in urban areas but not in the countryside.
- Market trends: Seasonal trends and fluctuations are likely to influence a car’s value. More popular brands and models may also be more expensive.
- Features: Cars with new technology or higher trim levels are also likely to have a higher value.
KBB Private Party vs. Trade-In vs. Dealer Pricing
KBB offers three pricing categories: Private Party, Trade-In and Dealer pricing. Let’s look at the differences:
- Private Party: This is the price you can expect if you sell your car to a dealer. This is often higher than the trade-in value because no middlemen are involved. These prices usually involve more negotiations, but higher prices.
- Trade-In: This is the price the dealership pays when you trade your car in as part of the purchase of another car. This is usually lower than private-party pricing because the dealer needs to make a profit from reselling the car.
- Dealer: This is the price you would expect to pay if you were buying the same car from a dealer. This is higher than private party and trade-in prices because it includes the dealer’s profit margin.
How to Use KBB to Check a Used Car’s Price
Step-by-Step Guide to Getting an Accurate Estimate
Find out the price of your used car in these steps:
- Visit the KBB website and then select “Get a Quote”
- Enter specific information about your car to get an accurate estimate. This includes make, model, year, mileage, trim level, condition, title status and information about accidents and previous owners.
- Choose the type of value you want from Private Party, Trade-In and Dealer retail prices.
- View the estimate, which will be provided as a range.
Common Mistakes to Avoid When Using KBB
KBB is a very useful tool, but there are some mistakes to avoid to ensure you get the most out of it:
- Accurate condition description: If you’re not honest about your car’s condition then the estimate may be incorrect. KBB relies on your assessment, so try not to be too subjective.
- Forgetting features and upgrades: If your car has optional features or received an upgrade, this could increase its value, so don’t forget to mention this.
- Not updating repairs: Similarly, if your car has been repaired or modified recently this could also raise its value.
- Forgetting ZIP code: Inputting your ZIP code is very important because your location can have a big impact on the resale value of your car. Seasonal trends can also impact the price value.
Using KBB Pricing for Buying and Selling
How Buyers Can Use KBB Pricing to Negotiate a Fair Deal
Before buying a used car, you should research the KBB price. Be sure to check both the Private Party and Dealer Retail value so you are prepared for all scenarios. It’s also important to check the car’s condition on KBB as this has a huge impact on its value.
Once you have done your research, you’ll be able to spot overpriced cars. You can also point this out during negotiations and use the KBB value to justify your offer.
How Sellers Can Use KBB to Price Their Car Competitively
After researching your car’s value on KBB, you can use these estimates to set your asking price. It’s best to go with the Private Party value for a competitive price. Once you have the KBB estimate, it’s also recommended to check local market prices as KBB is not always completely accurate.
It’s actually recommended to set your price slightly higher than this, so then you have room to lower down if necessary during negotiations. Once a buyer tries to haggle below the KBB price, you have a benchmark not to go under.
Limitations of Kelley Blue Book and Alternative Pricing Resources
When KBB Pricing May Not Reflect Market Trends Accurately
While KBB is a trusted resource, it is not always accurate. Here are some factors you should consider when reviewing a KBB estimate:
- Regional and seasonal demand: Certain cars are more popular in some areas than others. Four-wheel-drives are in demand in rural areas, but not always in cities. Meanwhile, car prices can vary over the year depending on the season and economic conditions. It’s important to also check local sales data while obtaining a KBB estimate.
- Supply: If a certain model has a limited supply, its true value could be much higher than the KBB estimate.
- Environment: New environmental regulations, a rise in gas prices or the implementation of stricter emissions standards may suddenly influence the value of a used car. This may impact not just the price of a used car, but also the cost of driving it.
- Inaccurate condition reporting: If the condition hasn’t been accurately reported on KBB, then the estimate is likely to be higher or lower than its true value.
Other Pricing Tools to Consider
Besides KBB, there are other car pricing tools that you can also consult to compare estimates:
- NADA: The National Automobile Dealers Association provides wholesale and retail values, so is particularly popular with dealers. It also offers pricing for boats, motorcycles and RVs.
- Carfax: In addition to providing Vehicle History Reports, Carfax also has its own pricing tool. This can be advantageous because it has access to a car’s detailed history including service records and accident history, which can have a big impact on a car’s value.
KBB can be an invaluable resource in pricing a used car. However, you must input the car’s information accurately for the most accurate estimates. It’s also advisable to check used car prices in your area to get an idea of the local market.