Clients have asked me of the validity of Kelly Blue Book, Edmunds, NADA Guides and if it should be considered the best way to determine the price they should pay for a used car. In other words, can I expect to pay what the “book” says? And if I am selling my car, is it best to look up the value on my car, and price it according to the price guide without doing any further research? Is Kelly Blue Book, Edmunds, and NADA Guides accurate?
The short answer is no. Let me explain what goes into these price guidelines.
Dealers use these to establish the value of trade-ins as well as comparing numbers to set their lot prices. Private sellers use it as the bible in selling their personal cars.
The misconception about KBB, Edmunds, and NADA Guides is that they are “setting” prices. This is just not true. They are actually in the business of “tracking” prices. It comes down supply and demand and KBB, Edmunds, and NADA Guides is only following the trail. Sometimes it takes a while for the information to get to these sources and recorded in their pricing charts. To post prices, they use an algorithm that takes prices posted on Autotrader, Cars.com, and others websites that are most widely used in the used car market. They also derive sale prices from major weekly auto auctions. By having such a broad band of information to pull from KBB, Edmunds, and NADA Guides has indeed positioned itself as the most accurate and authoritative evaluation price guides on the market.
So what is the best way to go about evaluating the price on a car? What is the best guide to help you determine fair pricing? There are three main guides that one can refer to KBB, Edmunds.com, and NADA.com. All of them use different algorithms, but the best way is to check all three and then check online for similar vehicles for sale.
If you are buying a car and you are wondering what you should pay, you can use KBB as a guide. But keep in mind this: People who are selling their cars view the condition of their vehicles rather optimistically. Like a bad marriage, there is so much emotional attachment they overlook the obvious. It is very rare to observe the condition of a car that is better than what person actual perceives that car's condition to be. Most people value their cars as “excellent” no matter what its current condition may be. Indeed beauty is in the eyes of the beholder. Therefore it is you, the informed buyer, that needs to educate the seller by having the very definitions of Excellent/ very good/ good/ fair on hand printed out from the KBB site. Quote it verbatim and see if you can knock some sense into them. Of course, if the seller has numerous calls on the car and people are lining up behind you to buy it, well your pleas will fall on deaf ears.
So, in summary, KBB, Edmunds, and NADA Guide are just guides. They are not the be all and end all. Whatever the market will bear is what the prices will be. In the end, it is all about the Quality of the car rather than the quality of the price. Pay the premium and look for excellence, even if you are paying above these Guides prices. You can get a good deal on a bad car all day long. The trick is to get a fair deal on a great car. After all, the bitterness of poor quality remains long after the sweetness of low price is forgotten.