It's Only a Guide

I was stopped outside my business law class yesterday evening. It is well known (by my valid contracts argument with my professor) that I sell cars, and a classmate had asked me a couple of questions.


The Kelley Blue Book is a great negotiation tool to start
with when working with dealerships, but that's the short
end of the stick.

Mostly about his vehicle he wanted to trade in.

"How do trade ins work? Do you go off Kelley Blue Book? How much can I get for my Nissan? Would you give me X amount for it? It runs amazing! I just don't like it. It sucks gas, and I need something that's a gas saver."

Whoa, there kiddo. I don't know anything about your car, much less how much I can give you for it. I don't make those life-or-death decisions. That'll cost me my job. I've always learned that in the car business (much less anywhere), the more you know, or perceived to know, the more you will be held responsible.

But I digress. Back to the subject at hand.

Kelley Blue Book seems to be the national standard for people to have some sort of an idea of what their car is worth. But when they step into a dealership, a dealer presents them a number for their vehicle, and they hit the roof. Why? Because everyone believes that their car, whether worth $500 at a scrap yard, or $15,000 at CarMax, will always think that it is worth more. Many times it is sentimental value, a happy occasion or two happened within that run-down Blue Ford Focus Hatchback with the paint oxidizing on the roof; that it "drives like a champ", rattling down the street at 35 miles an hour; or (my favorite) that they owe "$11,394.07" and it should be worth at least "$11,394.08".

Other times, they believe that they can sell their car outside on the street for much more. I have heard this scenario multiple times. I even had a client write a promissory note (a personal check) and promise to sell the car outside for the value of what he believed it would sell. And I get the humbling call that he couldn't sell it at the value he thought it was going to sell for.

Kelley Blue Book, or KBB, has set the American expectations for vehicle value above and beyond the norm. And the average consumer comes to rely on these so-called "tools" to try and get what they want. KBB is a guide; a negotiation tool. Consumers expect to get exactly what KBB tells them, and usually, consumers hit dealers with the "Excellent" condition value. I even had a chuckle at a client who brought in a 2004 Excursion and brought up "Retail Value" for his truck. 

Getting KBB is never the case. Not when you're trading in to the dealership. Not when you're selling your car private party. Not ever. I hate to burst the proverbial bubble, but it's absolutely true. An accurate vehicle price is based off of condition and demand. Is your vehicle in prime condition? Is your vehicle one of the most sought after in today's market? If you can do research on those questions, you have some ammunition going into a dealership and getting close to a satifactory value.

Now, there is an issue with getting to such a satisfactory number at a dealership. A dealership will not lose money unless under extreme circumstances--they aren't in the business of giving away cars. No matter how hard you fight them, they will make some sort of money off of you. With a value of a trade, dealers have an insider idea of what goes on at an auction, and can easily input a generalistic idea of what the value of your vehicle is worth. They won't buy your vehicle any more than what it is going at an auction, on top of reconditioning costs (which can be minor or highly substantial), unless they found some money elsewhere. If your vehicle was driven to Hell and back, a dealer will reflect that in their offer. If you take care of your vehicle, you have more of a negotiation factor in your corner.

Ultimately, NO ONE actually knows an accurate value of what a vehicle is worth, because there are so many different types of people and vehicles, how people drive, how long they drive, etc. It is on basic negotiations that Seller agrees to sell his vehicle on how much Buyer considers the value of the car. So, it is not the seller who wins... it's the buyer of the pre-owned vehicle because he set the value.

When and if you decide that you are in the market again, and you have a trade in, throw that blue book, or iPad, tablet, or any other nonsense in the trash or leave it at home. Salespeople hate that garbage. "Kelley Blue Book says I can get X for my car at excellent condition!" Is Kelley Blue Book buying your car or making any money off of you?

Do your research on similar cars you want to buy and then your research on similar vehicles of your car you are trading in at home. These are your negotiation tools and that's all they are. You won't get the value of the highest number you find, so leave that number at home as well and bite the bullet if the dealer comes close. I cannot stress that enough.

Research is your friend. Utilize it.