Kbb & nada

[khansmith]

My wife and I were contemplating purchasing a dreaded.....this is tough to say........gimme a moment.....a MINIVAN...Phew! That was tough. Anyway, we were considering trading in her car. Before I engaged the dealer, I did some research just to make sure I wasn't going in blind. I went to KBB and NADA to get some ballpark ranges. The dealer was almost angry when I cited my research; said that no one uses those numbers, not even banks! He then informed me that the only legitimate source for trade in value are the current auction sales price for my car.

What are your opinions on his claim (I am accepting condolences on the minivan as well)?

[CHANMADD]

I am and have been a dealer for years.
I can tell you that Kelly and NADA have effectivly taken the profit out of the car business for the dealers by giving (being transparent) all the "secret" dealer information!!
I closed my dealership and only sell to friends etc

Auction prices are now what the dealers use. The reality is ,is that if the dealer has not sold the car retail within a few weeks he has to take it back to auction and hope to get his money back or lose as little as possible.. So Yes.... what he can realize at auction this week is what it is worth!!!

[Bartruff1]

He can only risk the auction value...the guy has to make a profit on one of the cars !!! You must know that for the vehicle you are buying.... if you are willing to shop in a 500 mile radius.... you can pay 15-20% less if you can make a cash no trade offer and eliminate the appraisal credit check financing inspection processes....good luck...mini vans mean kids...and kids are fun !!

[khansmith]

I appreciate both of your insights. I was just taken aback by how upset this person was at my quoting of NADA and KBB. It was like I was quoting the satanic bible! Anyway, I can sure say I am happy not to be a dealer!

After reflecting on your responses, I have come to the following conclusions:

1.) Don't trade-in a car as dealers have to manage auction arbitrage risk which will result in a al ower than NADA/KBB valuation
2.) Dealers have a tough business
3.) I should come cash in hand and negotiate the amount of profit the dealer would find acceptable over cost of the vehicle (or alternatively, buy a car off ebay which I have done successfully 6 times without any issues).

Thanks again guys. I really appreciate it!

Khan

[Bartruff1]

There you go...if you can buy on Ebay and get a assurance that you are getting the quality you are paying for....you are getting the best price possible...tough to beat the price of a national auction...a international auction if you are dealing with very high value vehicles... I have a trailer and a motorhome and the time, so I do it often...

[elmariachi]

Khan,

Dealers stopped using the NADA and KBB decades ago. The data required dealers submit frequent reports and many didn't out of laziness amd exp[ense so it was an inaccurate data set. Were it not for the Internet and them pandering to the so-called "educated consumers", both would be long gone. Hearst Publications publishes a regional auction guide called the Black Book. It is a dealer-only printed publication but there are often links posted by credit unions that you can get to, here is one:

http://www.blackbookusa.com/bb/produ...d=cudirect.com

The data comes directly from recent auction sales and represents what vehicles are actually selling for at wholesale, categorized by condition. Note, your car is only extra-clean if it has zero miles, everything else falls in one of the 3 remaining categories, most likely average. Once you have a general idea what the car is worth at wholesale, you can make some offers that aren't quite so insulting. In this depressed economy, most dealers would like to get at least a $1000 profit, and on fast-moving cars maybe more. On a $20K car that's 5%, which is only fair.

As for trade-ins, dealers don't approach this from a risk management perspective, the auction is their insurance policy. When they bid a car they have already decided whether they plan to take it to auction for a quick $100-300 profit, or keep it and try and sell it for a larger $1000-1500 profit. And even if they DON'T run to the auction immediately, they will bid it safely to be able to do that if it sits unsold on their lot for 45 days.

Bartruff1 is right...eBay is generally a reflection of what the market price is, because its national and its real time. But people will and do pay more locally for the peace of mind and convenience of not having to have a car shipped across the country.

[khansmith]

Wow..this is GREAT feedback. It is interesting that AutoTrader (who owns one of the larger auction houses from my understanding) still prominently presents NADA on their site. You think they would be wise to this antiquated publication and stop misrepresenting prices to the public and causing such angst for the dealers.

As a consumer, I am just looking for a fair deal and not to put the screws to anyone. This is some great information that will help me alot! Thanks so much!

PS: That site is awesome! And I found out the guy was low-balling me on my trade-in based on the dealer's categorization of my car....scoundrels

[elmariachi]

As you have proven, many consumers still have a misperception about NADA guides and the Kelley Blue Book. Though the NADA is still the legislative voice for the industry, and although they still promote and garner substantial income from the NADA guides, dealers have't used them for years. Until recently the banks had a hard time of letting go of them because they had such conservative loan values. But consumers toting these books have been laughed at by dealership personnel since the late 70s. So when you walk in and say "I have an NADA guide and I know the values," that's like saying "I am a real dumba$$ and I own ocean-front property in Arizona."

But because there are millions of people (and a few hundred dealers) still loyal to the NADA brand, AutoTrader is just selling advertising, not endorsing the book.

You are quick to assume the guy was low-balling you, here are some counter-points:

1. When a dealer is selling a new car and he knows you can buy the same exact model from 10 different dealerships, they will shoot you a low price on the new car to be competitive, but then "hold" or bid less on the trade, which gives him a way to make back some margin later.

2. The book is just a guide, and people like Khan Smith always think there trade-in is worth more than it really is. Always. You expect him to give you max dollars, but for all you know, he just had to dump one just like it at auction for a $200 loss. And people think smoking in cars doesn't cost on resale?? Its costs between $500-1000 right here on the spot. Guaranteed.

3. Or while you might revere your trade, he might have seen 4 of them just like it go unsold at the auction and that data hasn't hit the book yet.

There are so many scenarios with these deals....you just need to use eBay and the BB and shop around. Through that process you will be more informed, then you can settle on a deal that suits you.

[khansmith]

Originally Posted by elmariachi

But consumers toting these books have been laughed at by dealership personnel since the late 70s. So when you walk in and say "I have an NADA guide and I know the values," that's like saying "I am a real dumba$$ and I own ocean-front property in Arizona."

But because there are millions of people (and a few hundred dealers) still loyal to the NADA brand, AutoTrader is just selling advertising, not endorsing the book.

Come now..that isn't fair to call folks (and me) a dumba$$ for referencing these guides. Like you said, "milions of people" are loyal to this book. If it is so bad, then dealers should put out an awareness campaign. I typed in "car values" into google and the organic search results (not paid search) shows KBB, NADA and Edmunds as the top. In fact, Kelly Blue Books site sees 9 million unique users a month (I am in the online advertising business and looked it up on comScore). How is anyone to know these books are antiquated if popular perception is that they are a gold standard?

[elmariachi]

Originally Posted by khansmith

Come now..that isn't fair to call folks (and me) a dumba$$ for referencing these guides. Like you said, "milions of people" are loyal to this book. If it is so bad, then dealers should put out an awareness campaign. I typed in "car values" into google and the organic search results (not paid search) shows KBB, NADA and Edmunds as the top. In fact, Kelly Blue Books site sees 9 million unique users a month (I am in the online advertising business and looked it up on comScore). How is anyone to know these books are antiquated if popular perception is that they are a gold standard?

My apologies, I was by NO means calling you a dumba$$. You own a Hurricane, you are family. I was talking about the way people toting those books are perceived by dealership salespeople.

Dealers rely on the National Auto Dealers Association for a number of things, so blasting the credibility of their little yellow book in public or taking out billboards gets them nothing. Dealerships are no longer the customers for these publications, consumers are. Edmunds was never dealer-oriented, but its a great place to gather up new vehicle invoice data. I came within $57 of the factory invoice on the 2010 Tundra I recently bought.