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Kelley Blue Book vs. NADA Used Car Values

Kelley vs. NADA

 

What is my car worth? This apparently is a loaded question. Kelley Blue Book says one thing and NADA says another. Which one is right? Consider this...

The structure of the vehicle values provides the differentiation between the two groups. At KBB there are many "values" or "worths": Trade-In, Private Party, Suggested Retail, and Certified Pre-owned. At NADA, there is Trade-In Value and Suggested Retail Value. NADA lumps all buyers and sellers into one category which could be entitled "Vehicle Value" or the like and you would simply infer that you get what you pay for if you are on the buying end. In a crowded and complicated marketplace, simplicity is hard to find.

 


Kelley Blue Book Trade-In Value - $8,364

Kelley Blue Book attempts to "funnel" you into one of two categories: "What should I pay for a used car" or "What's my car worth?" There is  problem with this philosophy: The insinuation that in a vehicle transaction that one party can get a "steal" and the other gets snookered.

Does the distinction between the current "worth" of a vehicle and what you should be expected to pay for a certain vehicle need to be made? Why does this matter? I'll tell you.

The test vehicle used in this scenario is my very own 2008 Hyundai Santa Fe GLS. The Trade-in value on my "Good" Santa Fe is $8,364 and the Private Party value is $10,274. Then I check out the suggested retail price which is essentially the dealer's price, and lo and behold...$12,624. Herein lies the problem.

KBB inadvertently skews used car values because of the consumer's perception that a dealer gets a Santa Fe for $8,364 and flips it for $12,624 for a fast handsome profit. You see consumers then head over to a used car dealer demanding at least $10k because that is what "I could sell it for".

The NADA's approach makes much more sense. There is no suggested retail, certified retail, private party clutter to cloud the mind. I would go a step further and advise dropping the Trade-In value as well. A car is worth what it is worth, considering the condition of the vehicle.

When you go to the new car lot or used car lot, your car is worth what it is worth. When you sell your car on autotrader, your car is worth what it is worth. When you go to purchase a vehicle, the car is worth what it is worth. And how do we know it's worth...you guessed it, exactly what price someone will pay and exactly the price at which someone will sell.

NADA Prices NADA Prices

Maybe this is parochial and the KBB way is sophisticated but I believe the "multiple value" approach oftentimes leads to falsely inflated values.

Views: 3205

Tags: car, used, values

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Comment by vismit magotra on February 22, 2014 at 1:05am

Thank you for the valuable information, I believe At KBB there are many "values" or "worths": Trade-In, Private Party, Suggested Retail, and Certified Pre-owned. At NADA.. But i have a question, What should we do when buys starts negotiation with the total amount that we have selected? I read in article nada blue book

But it does not clears to me, i understand book value tells us about the ware and tare the cost etc.. Below a member also comments better opportunities to get referrals, But do we need to start a online business to get referrals???

Comment by Big Tom LaPointe on September 18, 2013 at 4:52pm

then there's autotrader's trade-in marketplace, which will come in a few grand under both for 'trade offer' - which is why relationship selling is crucial, whether it's building rapport on a phone up, guest on the lot or live chat conversation

Comment by Brian Bennington on September 16, 2013 at 11:29am

Great comment, Tom!  Your concluding sentence says it all.  Primarily, because the "smiling at the end" means you and your customer have reached an accord, and equally important, the beginnings of a friendship.  Everyone who's sold cars should remember two important things.  First, your relationship with the customer trumps everything. After all, hardly anyone remembers exactly what they paid for their car a month after they got it.  And, we've all sold cars to people who could get a better price from someone else.  Second, unless you comfortably follow-up with your customer ("comfortably" meaning friendship-oriented), they will forget you name.  (As hard as it is for you to believe it, it's true.)

Now, for the reps "in the trenches."  To benefit you with better opportunities to get referrals, here's a suggestion.  Right before the customer leaves the lot in their new "wheels" (and we all know they want to drive off ASAP), in your most serious demeanor, let them know you couldn't cover all of the questions they're sure to have after several weeks of ownership, so you might bother them with a few more phone calls than they'll like, but it's only because you want to make sure they know all about car, so they can get the most from it.

The upside of this, and it only lasts for a short while, is that their news to their friends will be their new vehicle and this is a great time to stay in touch for possible referrals.  Plus, your calls won't be unexpected and they'll help to reinforce your "after purchase" concern, a real trust builder.

Comment by Phil Tackett on September 16, 2013 at 7:41am

Well, out here in the trenches, I always tell people that their car is worth what we're willing to give for it and they're willing to take.  That applies in reverse to the one we're selling, too.  Ultimately if they're smiling and we're smiling at the end we get a car deal done!

Comment by Brian Bennington on September 15, 2013 at 3:08pm

Provocative post, Scott.  Is this about determining the most accurate market ACV, or determining what to use in customer negotiating?  I'd say, in the value proposition, every pre-owned vehicle has it's own high points and low points, so each will vary in their ACV.  That must put me on the "worth what it is worth" side of this discussion.

As for negotiating a trade-in valuation with a retail customer, that depends on a customer's "temperature" regarding what they think their trade is worth.  When they're hot about it, repeat the number they're "sure" it's worth for their confirmation, and "ease" them into a commitment that they'll buy if they get their number.  The "repeating" is important, because it allows the customer to "hear" what they've thought, and can often expose any other purchase objections.  If their "cooler" about it, and not as concerned, sell them the new vehicle and the trade-in value will work itself out.

From a selling position, I always tried to stay away from "looking something up to prove a point."  It muddies the water.  I felt my limited time with a customer was better put to use building the value of their new vehicle, figuring out their positive character points and then expressing admiration for them, and giving them plenty of reassurance in every aspect of their buying decision.  As for the admiration, nearly everyone is admirable for something, and when you discover and then recognize it with sincerity, it changes both your attitude and theirs.  For reassurance, I almost exclusively used collected customer testimonials.  I learned how to collect and effectively present them early on and, for years, have provided my methods to my relationship centered marketing customers.  It's unfortunate that more reps don't recognize how their customers can continue to "sell for them" long after their purchase. I guess what I'm saying is good selling techniques minimizes the importance of trade valuation.

   

Comment by David Ruggles on September 13, 2013 at 12:49pm

To a dealer, a car is worth whatever the last guy bid at auction.  The art of appraisal is knowing what that price is without going to the auction to find out.

Comment by Tarry Shebesta on September 13, 2013 at 10:54am

So with Black Book making a big push with their trade-in widget on dealer websites, are they gaining ground with the customer's perception?

They've always been a source for dealers up until now.

 

Comment by Keith Platt on September 13, 2013 at 10:39am

Sure customers come in asking for KKB "Retail" values or maybe even Private party values. As early as the late 90s I would take the customer to a computer in the showroom and go to KBB.com and walk through the values. It is all spelled out right on the sight what each value means. Not to mention there are no two used cars exactly alike. Every car has it's own value (worth) at each point of the transaction cycle...whether it's at time of trade (recon and prep to sale plus stated or implied warranty), a private party (no warranty or piece of mind), or dealer average retail lot listed price all in and standing tall.       

Comment by Gregory Ree on September 13, 2013 at 9:52am

I'm with Ralph on this one. Third party validation is a non-confrontational and consultative approach to building a relationship with the customer.

Comment by James Jarrett on September 13, 2013 at 9:13am

I definitely don't agree on the "it is worth what it is worth comment either"  Values are different.  Is a classic car worth the same as a trade in to a dealer as it is private party?  Absolutely not.  We have people who come to our dealership all the time with redone 1970's model trucks that are mint everything.  Trade in value is generally a quarter of the value of private party sale.  Clarification of values is part of the process of building rapport with the customer and properly explaining those issues.  To keep capitulating to the public on what the want and perceive is not correct.  They are not the professionals we are.

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