Understanding Kelley Blue Book Values

A Brief Blue Book^® History
Since 1918, when a young preacher's son named Les Kelley opened his used car dealership in Los Angeles and began creating a list of used cars he wanted to purchase from neighboring dealers, Kelley Blue Book^® values have been recognized as the de facto standard in America. Today, no other pricing guide is as accepted and trusted by both consumers and the automotive industry.

Kelley Blue Book began its valuation service to fulfill a need for used car pricing information by the banking and insurance industries. Loan givers needed to evaluate the value of the collateral on used car auto loans and insurance companies needed replacement values for insured vehicles. Blue Book values soon became so widely accepted that even the US government used them to place a ceiling on car prices after World War II. At this point, dealers nationwide began subscribing to the Blue Book^® on a regular basis.

Kelley Blue Book existed mostly as a "trade" publication for decades. And other than paying a visit to the local library, car-buying consumers did not have access to Kelley Blue Book values until 1993 when the Consumer Edition of the Blue Book was offered. Now, Kelley Blue Book values are available in both industry and consumer published books and on the Internet at kbb.com - the #1 automotive site in the nation.

The Car Buying Market Today
To gain some perspective on the overall car market in the US, each year, approximately 213 million cars drive the streets of America. As for vehicles that are purchased annually, here are some interesting observations:

• Out of all the vehicles purchased in the USA each year, 16 million are new and 41 million are used.
• Of all the used vehicles purchased by consumers:
  one-third are from private parties
  one-third are from franchised dealerships
  one-third are from independent dealers
• 17 million used vehicles are sold to auctions each year.

When you think of other industries that deal in new and used valuations such as real estate, antiques, art, musical equipment, high-end sporting equipment—what differentiates the car market is the nature of the constantly changing condition of cars, which quickly depreciate with use. Another frequently overlooked fact is that cars being sold at dealerships must meet basic safety standards to make the unit ready to sell such as working brakes, lights, etc. These standards are not, however, factored into a private party sale, therefore the values for private party are usually lower than retail. Additionally, there are no standards placed on private party cars and they do not face the legal liabilities that dealers experience.

How Does Kelley Blue Book Get The Values?
Beginning with the basic new vehicle information from the manufacturer, each and every day, Kelley Blue Book receives information on both new and used car purchases. The following sources make up the bulk of a typical year in used car purchase information and feed the base of data our experts analyze:

Wholesale Auctions
Open exclusively to the trade, representatives from dealerships and wholesalers bring vehicles to the auction to trade or sell and they purchase other vehicles they think will sell at their store. Auctions receive their vehicles from dealers, rental agencies, fleet owners, off-lease vehicles owned by financial institutions and manufacturers' demos and promotional vehicles.

Kelley Blue Book representatives audit these auctions on a regular basis to gather a better understanding of what the highest possible "actual cash value" of a given used vehicle will bring at auction.

Independent Dealers
These are the dealerships you see every day that are selling used vehicles only. These dealers sell used vehicles to auctions, consumers and wholesalers.

Franchised Dealers
These are specifically branded new car dealerships authorized by the respective manufacturer such as Honda, Ford, etc. These dealers sell used vehicles to both auctions and consumers.

Rental & Fleet
Rental fleets usually send their cars to auction after one year of service, but have extended that usage in recent years.

Original Equipment Manufacturers (O.E.M.s)
The manufacturers (such as Honda, Ford, etc.), bring used vehicles to auction after they have utilized them as employee cars, promotions or other company distribution.

Financial Institution Lessors
When you lease a car, the bank owns it and you rent the use of the vehicle. After the term of the lease is complete, these pre-owned vehicles are either sold back to the lessee or directly to a dealer at auction. Financial institutions also trade and sell repossessed cars and trucks.

Consumer Private Party Transactions
Kelley Blue Book tracks consumer sale prices each year.

How are the final values determined?
Used values are determined by a proprietary editorial process. This process starts with a thorough analysis of all collected data along with historical trends, current economic conditions, industry developments, seasonality and location. The resulting values 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.

What values are available through Kelley Blue Book?

Kelley Blue Book^® Private Party Value
This is a value, adjusted for condition, reflecting what a consumer might expect to pay for a used car when purchasing from another private party or what a seller might expect to get for the sale of a used car from a private party.

Kelley Blue Book^® Trade-In Value
This is a value, adjusted for condition, reflecting what a consumer could expect to receive from an auto dealer in trade for a retail vehicle.

Kelley Blue Book^® Suggested Retail Value (MSRP for Used Cars)
This value represents the amount an auto dealer might ask for a specific vehicle for sale to a consumer at the dealership. This value assumes a fully reconditioned vehicle in excellent condition and is a "starting point" for negotiation just like a new car sticker price.

NOTE: Dealerships must bring the vehicle up to minimum safety standards and most dealers also refurbish mechanically and cosmetically prior to selling.

New Car Blue Book^® Values
The New Car Blue Book value reflects a vehicle's actual selling price and is based on tens of thousands of recent real sales transactions from auto dealers across the United States. The New Car Blue Book value is not calculated or based on a proprietary formula; instead it is derived from actual new vehicle sales and extensive knowledge of the marketplace.