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12/20/19 The Truth About KBB and NADA Guide
The Truth about Kelly Blue Book
Since when did "popular" mean "accurate?"
When buying or selling a used car, many people rely on the Kelley Blue Book (KBB). One sign of its popularity: Roughly 20 million unique visitors per month log on to the Kelley Blue Book website.
Although automotive experts acknowledge that KBB is one of the most popular and trusted guides in automotive pricing, the question remains: Is it accurate and reliable? As consumers, we create our own "fictional truths." We know there’s an endless amount of popular things that exist for no valid reason, so do we critically look at these resources? Are they as flawless as we think?
The real question to ponder over is "is Kelley Blue Book accurate?" or "is Kelley Blue Book realistic?" Whether you love or hate the number that Kelley Blue Book quotes for your vehicle, you need to first acknowledge that Kelley Blue Book isn’t all factual. It is not all-knowing. It is not without flaws and failed systems
"The Bottom Line KBB can be a decent general idea of where the value of your vehicle may fall but it does not take into account a multitude of factors. At the end of the day KBB is averaging in current retail rates of vehicles n the market, which is significant flawed. If a vehicle hasn't sold yet at an ASKING PRICE how can you possible use that as a basis for value?, you cant."
While Kelley Blue Book tried to make sure that all the information on their site it up-to-date and relevant to the current marketplace, no on can be perfect. That means, there are periods of time in which you’ll get a certain quote for your vehicle, but the site has yet to adjust to the current industry and marketplace.
So while you received a high quote that you’re okay with, if you were to take your bike to the dealer and get a lower offer, referencing the Kelley Blue Book price will have dealers and other buyers shaking their head at you. They know this industry shifts and changes quickly, and with all the updates and edits demanded for KBB, it's just not feasible for a website to keep up with those changes.
Dealers and buyers don't take it seriously
No, they don’t refrain from using it because "Kelley Blue Book will give me the highest price and they don’t want to pay me that." Yes, dealers need to make money; that’s a fact, it's a business. But to continue to make a profit, they need to offer the seller a fair price, and they do not base offers on Kelley Blue Book. AR Auto Exchange personally uses resources with more accurate data, like Black Book and recently sold vehicles.
Anyone with an idea of how data collection works can understand how flawed the Kelley Blue Book Value system is. Instead, dealers use things like National Auto Research Black Book and Manheim Market Report, both of which the public cannot access. Those resources do not rely on people inserting their biased information about their vehicles. Professional resources rely on the actual, comparable sales and purchases of all cars, SUVs, and trucks, along with the details and costs associated with it. Yes, there are facts in numbers.
But how you get those numbers are just as important as the numbers themselves.
Some Issues with KBB Pricing
Here are factors that could affect how accurate the KBB values are:
Lag – It takes time for data and analysis to make its way through KBB. Prices listed may not always reflect the very latest trends and economic conditions.
Consumer bias – Most people think the car they are selling or trading in is in better condition than it really is. If you misjudge the condition of a car for trade-in or purchase, your expectations may not match the reality of KBB’s valuation structure.
Mismatched data – Most dealers do not use KBB for trade-in (wholesale) values. Instead, many rely on National Auto Research’s Black Book or the Manheim Market Report, neither of which is available to the public. More important, both tend to skew lower than KBB in wholesale pricing.
Solutions For Consumers
If you use KBB as a general guide and follow the suggestions below, Kelley Blue Book data can be very useful.
Print out definitions. If negotiating to buy a used car from a private seller, show KBB’s car condition definitions to the seller, especially if you believe the car is priced too high.
Negotiate. KBB’s pricing structure tends to favors dealers, meaning listed retail prices can be higher than with other guides. Start with the listed retail price and bargain down.
Ask for sources. Be aware that insider guides like Manheim or Black Book tend to show lower wholesale prices than KBB. Ask about the source of the trade-in offer or wholesale price.
Consult other guides. Consult one or more other websites or pricing guides to get an “average” for the vehicle you are trading in, selling or planning to buy.
The following are several sources you can check for pricing and rating information before buying, trading in or selling a used car.
The Bottom Line
KBB can be a decent general idea of where the value of your vehicle may fall but it does not take into account a multitude of factors. At the end of the day KBB is averaging in current retail rates of vehicles n the market, which is significant flawed. If a vehicle hasn't sold yet at an ASKING PRICE how can you possible use that as a basis for value?, you cant.
The Truth about NADA Guide
Where Does NADA Get It’s Information Listed In Its Guide?
The National Automobile Dealers Association’s NADA Blue Book Guide is its official retail-pricing list, therefore allowing it to make use of a wide variety of points of sale. This results in a list of car prices. Sound reasonable, right? Well, that depends on your point of view. When making a used car purchase ascertaining exactly the future value for a specific vehicle can be difficult because of typical discrepancies between values listed in the NADA guide and KBB.
How Does NADA List Prices of Cars in Their Guide?
Representatives of NADA promote their guide representing it as the strongest, most valid, and most reliable information list of auto market values when compared to the KBB guide, and even Edmunds pricing guide. Their claim that NADA has a unique set of data points the other guides are missing and don’t have access to is true since the others don’t have access to sales made by the exclusively National Automobile Dealers Association affiliated auto dealers. This results in NADA using hundreds of thousands of individual sales transactions to derive with an average pricing list for their guide. However, are their figures fair market values consumers should count on? To put it simply, no they’re not.
What Are NADA Values Issues?
You may not think a couple of issues are a big deal, but think about these.
NADA makes use only of dealership sales prices. This means no private sales prices are include in their algorithm. That means the same car – same make, model, year – a dealership is selling in the exact same condition – similar mileage, same wear and tear – is not going to be much value to you. Let’s face it, dealers tend to jack up the sale price of a car quite a bit more than private sellers do. On top of this, the NADA guide doesn’t always account for any discounts or incentives car dealerships offer.
The cars used for analysis in their algorithm are vehicles sold in very clean condition. Individual sales from private sellers are not normally of cars in very good condition, with a small fraction falling into the same condition parameters of dealership used car sales. For this reason alone, the NADA value for vehicles may not be the best gauge of a used car sale price by a private seller.