KBB®, Edmunds®, and NADA® and other 3rd party sites
People often come to us with questions about pricing from 3rd party sites; sites that give out information about both new and used cars for sale. We are talking about sites like CarGurus®, Edmunds®, Kelley Blue Book, NADA®, and Cars.com. These sites often have car reviews and real life test reports, user experiences and car ratings, and pricing data, or recommended pricing, on used cars and new cars for both trade ins, private party sales, and dealership sales. Sites such as these get their used car pricing information from various sources. Some use information from cars for sale, some from cars that have actually sold. Some use the pricing data from auctions, some from the state registrations. And once that is gathered there has to be some sort of adjustment made to figure out the sale price from the wholesale price, the trade in price, and auction value. After that, don’t forget that the different trim levels of the car, plus the cars actual condition which can vary greatly from one car to the next and therefore affect the value. With that, we uncover the problem and disdain most auto dealers have with these 3rd party car sites: they don’t actually sell cars. They don’t have parking lots full of inventory. They have not actually seen the car for sale, sat in it, touched it, and driven the cars they are reporting on. Hence, the information they provide, and the pricing history, is not always applicable in determining the fair price on a different used car even though it might be the same year, make, and model. What really matters to a car dealership that is actually selling the car, is how much did the car cost them to get it, how much overhead and bills do they have to pay in order to make the car ready for sale and keep up the dealership, the building, and pay the sales people. The information that 3rd party sites provide can sometimes be helpful, but it doesn’t necessarily apply to every car and every car sale.
In addition to the obvious differences that can exist from one car to the next and how challenging it can be to determine what is a fair price for a car without being able to physically look at the car itself, add to that the different information 3rd party car sites used in arriving at what they consider to be a fair price.
It is our understanding that Kelly Blue Book (KBB®) uses asking price from the best cars from used car dealerships, based on year, make, and model, as their base input; as their starting point. From there they then reduce that number by some computed method to determine the private party sale value for the used car. So that means it’s possible their prices may be high on both retail price and private party used car pricing.
Edmunds® is another car site people reference when researching their next used car. Edmunds® states that they use actual sale prices from the state’s registration records. So, ALL car sales are included. This means that even if used car sales price shows it was really low because the dealership sold a car to the brother of the owner, that sales price is factored into their averages on what a fair price is for the used car you are looking at. So all cars sold to friends and family may skew the figures. In that way, it’s possible for Edmunds® to show what they consider to be a fair price to be biased on the low side.
What about NADA®? Lots of people reference the NADA® when looking at the prices of used cars for sale. It is our understanding that the NADA® uses the actual sales price and actual trade-in prices from what the dealerships are reporting. In a way, this makes their pricing data a bit more fair and legitimate though it still may include those “super” deals to friends and family. This is the reason that banks and credit unions sometimes use NADA® car values when making loan decisions. However, the bank or credit agency may still offer only the “auction” value of the car because this is what can get for the car if you stop paying the bill and they have to send it to an auction to recover their money. This is why often times the bank or credit union will only loan an amount that is less than the asking price. It doesn’t mean the asking price of the car is too high.
So as you can see these 3rd party sites can offer valuable information on cars for sale; things like reviews and real life experiences, and repair and total ownership costs. And sometimes this information is more reliable for used cars because the new cars and new model years don’t have enough information behind them yet; there is not enough history on the new models yet. When it comes to pricing information however it is harder to make the information apply to that actual car for sale that you are looking at. We’ve seen two cars, the same model from the same year, with the same mileage, be vastly different in price just based on the condition of the car. One may have been kept in a garage, with 1 owner, who was single and meticulously clean. The other may have been a family of 4 plus a dog, and they never had time for maintenance or cleaning the car. The kids may have spilled soft drinks and melted crayons in the carpet. It would be hard to take these two cars and apply the same value based on sales history of 10 other cars like it that are 100 miles away. The car for sale in real life doesn’t always match up to the car for sale on paper or a third party website.