Understanding How Bluebook Car Prices are Calculated for Proper Auto Value

January 27, 2012

In the world of car prices, the gold standard is actually Bluebook car prices. It is known as KBB or the Kelley Blue Book, and it is used by many dealerships to establish the value of a vehicle that is being brought in for trade. The depth of the industry's dependence on the Blue Book is easy to gauge when you realize that at some point in every transaction, a KBB report is generated on a car-especially a used car-so that the buyer can see the type of deal he or she is getting.

Base Variety of Sources

KBB uses a variety of sources to determine its pricing matrix. Notice the word "matrix" because it is being used specifically here. Dealers and private parties use KBB not only to establish the value of a vehicle in trade, but also to establish its value as a private sale and also to put a retail price on it for resale. Its importance is huge. So, what is the basis for its numbers?

KBB, which is also the owner of Autotrader, relies on a combination of dealer pricing reports, as well as the results of several major weekly auto auctions (the result of its ownership of Autotrader, along with the pricing generated directly by Autotrader) to set its prices. In this way, it is able to establish itself as the broadest car value guide available, whose numbers more closely approach reality than others.

This is how a dealership uses it to establish auto value pricing. An appraiser physically looks at a customer's trade-in vehicle for telltale damage, such as dappled paint along the wipers, hood and the door frames, as well as along the wheel wells. He also looks for signs of overspray in the trunk and hood areas and he looks to see that all of the parts still retain their VIN markings (all original car pieces bear the VIN of the vehicle to which they are fastened). When the appraiser is finished, he looks at the value of similar cars across the country in either the NADA or Galves Auto Guides and then sets a value for the car. That value is not the "retail sale value" or "private sale value." Instead, it is the "trade-in value" for the vehicle.

Your Car's Value

To determine just what a dealer thinks of your car, before you get into the usual back-and-forth of the car deal, evaluate cars similar to yours within your zip code (you are asked for that piece of information). Make sure the mileage is accurate when you fill out the check boxes on the Kelley Blue Book website, and include all equipment that is in the car. Then, run the evaluation of the vehicle, using the "fair" setting because that is the one dealers use. It doesn't matter if you are religious about your car's maintenance and shine, to a dealer your vehicle will always be trade/fair. To find this range, run the car through the various windows, making sure you choose trade and fair condition. You will find a range of vehicle values is still generated from excellent to poor with "fair" in the middle. Use that figure to tell you what the dealer thinks of the value of your car.

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