Kelley Blue Book Pricing and Used Car Value
Way back in the 1920s a young car salesman from California, Les Kelley, began compiling a list of local area car prices in an effort to gain a better understanding of the value of each vehicle he was selling. From these humbling beginning, the Kelley Blue Book pricing system was born, as soon banks and dealers began to turn to Kelley’s listing as a tool for establishing market value.
What once was one man’s simple listing has turned into a nationally recognized and respected source – as the Kelley Blue Book pricing system has become a way for buyers and sellers, private parties and dealers, and experts and novices to all share common ground during the negotiation process.
When in need of a resource that offers an unbiased starting point for negotiations, the Kelley Blue Book pricing guide offers insights on:
- New Car Value
- Used Car Value
- Trade in Value
Determining New Car Value with Kelley Blue Book Pricing
Too many car buyers make the mistake of thinking that there is little room for negotiating the price of a new car. What they wind up doing is walking directly into the dealership -without conducting any prior research – and settle for the listed sticker price. This is a mistake that can end up costing you greatly. For instance, even though all new vehicles must display the Manufacturer’s Suggested Retail Price (MSRP), this number can lull you into a false sense of security, causing you to ignore other factors that can impact the car’s value.
The Kelley Blue Book pricing guide offers insight beyond MSRP, detailing four areas that are key parts of the negotiation process:
- Manufacturer’s suggested retail price: -This is the price suggested by the manufacturer. Please remember that this price is just a guide. In fact, the MSRP is often inflated, meaning you should expect to pay less than this, certainly never more.
- Dealer invoice: Ever wonder, “How much did it cost the dealer to buy this vehicle?” The dealer invoice price can offer some insight into the vehicle’s wholesale price. Keep in mind, this number should be used as a starting point for negotiations. Because dealers want to turn some profit, you should expect to pay more than this.
- New car blue book value: This is the average selling price of the vehicle, taken from actual sales of the same vehicle throughout the country. Remember that this number can fluctuate depending on the area you live. For instance, a car in California is going to be priced differently than a car in Ohio.
- Optional-equipment price: There is a definitive difference between a car with no extras and a car with all the extras included. Kelley Blue Book pricing takes this into account when determining the value of a vehicle.
Kelley Blue Book Pricing and Used Car Value:
Just like the price of a new car is different than the price of a used car, a car purchased from a dealer will be priced differently than a car purchased from a private party. The good news is that the Kelley Blue Book pricing guide takes all of this into consideration:
- Used car retail value: The retail value serves as a starting point for negotiations between the dealer and car buyer. This value includes expenses like advertising, sales commission and operating costs. KBB also assumes the dealer spent money reconditioning the car, repairing or replacing worn items like brake and tires.
- Private party value: Private party value is what you could expect to pay for a car if you purchased it from an independent seller. This value is usually lower than the retail price because it assumes the car is being sold “As Is.”
- Trade-in-value: Trade-in Value is what you could expect to receive if you traded the vehicle into the dealership. Because the dealer will incur additional expenses, such as safety inspections, reconditioning, marketing and reselling, this value is lower than what you would receive if you sold it privately.
The Difference between Retail Price and Selling Price
Keep in mind that Kelley Blue Book pricing should only be used as a rough guide. In fact dealers will often use it as a negation tool, citing the fact that their vehicles are actually priced lower than the Kelley Blue Book listed price. Unfortunately, this tactic can be misleading. Most used cars have some “wear and tear,” but many dealers will not account for this when calculating the KBB estimated price. This in turn tends to inflate the value.
by a Used Cars expert | on August 14th, 2013
No comments:
Post a Comment