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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: 5986

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 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.

Comment by Cathy Nesbit on September 13, 2013 at 8:39am

Ralph, I need to "like" your comment. Far too often in the "dealer" world we forget what the customer perceives. We get familiar with our world and the way it works and don't give a thought to what the customer thinks. ie: "well we don't use kbb, we use nada, everyone knows that!" (well everyone except your customer because he's going to kbb!)

Comment by David Ruggles on September 13, 2013 at 7:13am

Real auction values are all that count.  Those who actually attend auctions regularly will have a much better handle on the real market than those who rely on any book.  Frankly, I like MMR and Black Book as appraisal tools to supplement regular auction visits for observation, buying and selling.  Bankers have different needs.

Many times I've watched  a bunch of like vehicles go through auction.  Even if the miles and condition are the same, color means a lot.  A car will usually bring substantially more money at the beginning a the run of vehicles than toward the end.  Then, after paying high bid wholesale, most dealerships bring the car back to the dealership so parts and service can have their way with the vehicle at retail recon prices.  Dealers purposely put themselves "under water" on preowned inventory in a misplaced strategy to pencil the sales departments out of gross profit.  That might have worked when dealerships could sell from "cost."  No longer.  Internals need to be done at a markup, but retail is just crazy.

Comment by Ralph Paglia on September 12, 2013 at 10:17pm
I am not sure I agree with any statement as inane as "worth what it is worth", but I do agree that consumer perception of these various value types seems to lead to more confusion than well informed buyers. However, when it comes to actually making the deal, my experience has been that consumers are more likely to accept valuations that use KBB as a credible third party resource than they are to accept NADA...

I have heard on far too many occasions, when attempting to reference the NADA Guide in making a deal, when the customer says something along the lines of: "OK, so let me get this straight... You want me to accept a trade-in value for my car that is based on some guide published by the National Automobile DEALER Association? You gotta be joking, right?"

The point I want to make is that regardless of what each dealer uses in determining an ACV on a trade-in, if you need some third party validation as a reference point for the customer, using an information resource that is from a CAR DEALER ASSOCIATION is not necessarily the best way to go if you want to close that sale today... On the other hand, I have used Kelley Blue Book well over 500 times in my 30+ year career selling cars and trucks to help a customer feel like they were being provided with a valuation resource that is both credible and not biased toward the dealer's perspective. Regardless of what yours or my reality is, customer perception is what makes or breaks a deal...

To this day, I prefer to bring the customer to a computer, take them to www.KBB.com and then coach them through the trade-in valuation process, going real slow, so they take ownership of the results... Then use the KBB value as a mutually agreed upon reference point to obtain a commitment to buy now. It works and I have trained HUNDREDS of automotive sales professionals how to do it, and years later many of them still thank me... It is a non-confrontational and consultative approach to building a deal and a purchase commitment that the customer feels comfortable with.

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