Because the auto market has significant regional differences, they are also adjusted to reflect local conditions in over 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.
Kelley Blue Book 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," but instead 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. Instead, they simply need to be close enough to give the buyer and seller a common understanding of the limits of the transaction. As former Kelley Blue Book President Paul Johnson once said, "One thing we know about each used car value is that it will be 'wrong,' but each value will be close enough to the 'real' value that it will facilitate the transaction.
The process 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.
Immense amounts of data are used to produce the values Kelley Blue Book quotes. First, there is market demand. Depending on the area in which a vehicle is being sold, 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 mpact 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.
But in reality, each used car has several values. For example, if a used car is sold to an individual — a private party — the seller can usually expect to get more money for it than if that car were sold or traded in to a dealer. Private-party buyers don't plan to resell the cars they buy, so they can afford to pay more for a vehicle than a used-car dealer can. The used-car dealer must buy at a low enough price that the business can make money when selling the car to a consumer after preparing it at some expense for sale.
Because of factors like these, each used car has a " trade-in value ," a "private party value," and a "retail value. Kelley Blue Book used-car trade-in value is the amount a consumer could expect to receive from the dealer if she or he traded it in as part of a transaction for the purchase or lease of another vehicle.
Keep in mind that this assumes an accurate appraisal of the vehicle. It is also important to note that the trade-in value is often less than one would receive if selling the car to a private individual, and it could be more than if it were sold directly to a dealer. The Kelley Blue Book used-car private party value is what a consumer can expect to pay if buying a used car from another consumer.
As with all Kelly Blue Book values, the private party value is a guide. It can change depending on several factors. For instance, if there is a warranty attached to the vehicle, the value is likely to be higher than the general private party value because warranty coverage itself adds value. The certified pre-owned value of a used vehicle is also typically higher than the private party value. It incorporates the fact that the vehicle is offered with a warranty rather than as-is, which is the way the typical used vehicle is sold.
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Key Takeaways The Kelley Blue Book—and its equally popular website—is one of the most trusted guides for automobile pricing, used by those who are buying or selling cars.
Kelley assesses the following values: private party value, trade-in value, suggested retail value, and certified pre-owned CPO value. Kelley determines Blue Book values by analyzing pricing information from real-world used car prices, as well as industry developments, economic conditions, and location. Potential problems with Blue Book values include a delay as price information is assessed, the consumer tendency to overrate the value of the car they are selling or trading in, and a mismatch between wholesale values listed by Kelley and the prices used by dealers, who access special industry-only pricing info.
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Budgeting Cars That Depreciate the Least. Partner Links. Related Terms Blue Book The Blue Book or Kelley Blue Book lists new and used car prices, helping car buyers determine the fair market value and trade-in value of automobiles. Total Cost of Ownership TCO : Asset Costs Over the Long Term 'Total cost of ownership' is the purchase price of an asset plus the costs of operation, representing the complete cost through its entire lifecycle.
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