When buying or selling a used car, many people rely on the Kelley Blue Book (KBB), which has been around since 1926. 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 the Kelley Blue Book is one of the most popular and trusted guides in automotive pricing, the question remains: Is it accurate and reliable? Here’s a look at how Kelley determines car pricing, an assessment of some issues consumers might encounter with KBB pricing, and a brief review of some of the top competitors in the industry.
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.
How Kelley Blue Book Determines Car Values
Kelley Blue Book receives real-world used car prices on a daily basis from wholesale auctionsindependent and franchised dealers, rental fleets, auto manufacturers, lessorsand private party transactions.
Kelley’s proprietary algorithm analyzes pricing data along with historical trends, current economic conditionsindustry developments, time of year, and location to determine Kelley Blue Book values.
That process results in the following values for used cars:
- Private-party value refers to how much you will have to pay for a specific used car from a private seller.
- Trade-in value is the amount you are likely to get from a dealer for a trade-in.
- Suggested retail value refers to what dealers are typically asking for a specific used car.
- Certified pre-owned (CPO) value tells us how much cars covered by the CPO program are worth.
Some Issues With KBB Pricing
Some factors that could affect the accuracy of KBB values are lag time, consumer bias, and mismatched data.
Make Time
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 Reportneither of which is available to the public. More important, both tend to skew lower than KBB in wholesale pricing.
1926
The year Les Kelley, a Los Angeles car dealer, published the first Kelley Blue Book.
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 favor dealers, meaning listed retail prices can be higher than 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.
Since the three main consumer guides—KBB, Edmunds.com, and NADA—use different algorithms, your best bet is to check all three and calculate an average price.
Additional Resources
The following are several sources you can check for pricing and rating information before buying, trading in, or selling a used car.
Edmunds: This website offers an appraisal engine that includes five car condition categories compared with KBB’s four. This can be helpful—or generate confusion—depending on how realistic you are about your car’s condition. Many experts believe Edmunds’ values are more accurate than KBB’s. That’s not always the case, of course, which is why getting several estimates and averaging still makes the most sense.
NOTHING Guides: One of the oldest guides, NADA guides were designed for dealer members of the National Automobile Dealers Association (NADA) trade group. NADA pricing is often higher than Kelley Blue Book since the algorithm has a standard that calls for all trade-ins to be in very clean condition. As a result, you may need to adjust NADA prices down.
J.D. Power: Although the ratings are only for new cars, the used car search provides dealer pricing based on ZIP code. This information could be valuable if you are planning to sell a car outright and want to know what typical pricing in your area looks like.
Consumer Reports: The well-respected, noncommercial (no advertising accepted) publication offers lots of information if you buy an online subscription, less if you don’t. The website features general pricing on used cars, information on reliability, cars to avoid, and much more.
The Bottom Line
Kelley Blue Book is a very good resource, but it should not be the only one you consult. Although none of the top used car buying guides is perfect, when taken together—along with additional information gained from other websites and tools, such as auto loan calculators—they can provide reasonably reliable and accurate information for your used car transaction.