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COMPARE & CONTRAST: USED CAR PRICES IN KELLEY BLUE BOOK AND NEW-CAR INVOICES

Toronto’s new and used car buyers embrace one of two price and value guides as gospel, depending on the vehicle types being perused.

Some check in with a third resource, but we’ll come back to that one.

Generally speaking, invoice prices provide the leading insight into any dealership’s new-vehicle pricing. Meanwhile, Kelley Blue Book provides the definitive baseline for used car and truck pricing. Though both provide benchmarks in vastly different vehicle marketplaces, each helps buyers in the market for either new or used cars in Toronto and other local markets around the world recognize fair deals when they arise.

Before comparing and contrasting the effective uses of each, a caution: neither definitively illustrates a hardline price point. Ultimately, what’s known as true market value plays the biggest role of all in determining a listed or sale price, in addition to the influence of numerous x-factors that can and will vary from one individual transaction to the next.

More succinctly, what you see listed won’t always predict what you’ll either pay or receive.

HOW THEY’RE ALIKE

Both Kelley Blue Book and any dealership’s new-car invoices take the manufacturer’s suggested retail price (MSRP) into account with other relevant factors in order to calculate a used or new vehicle’s respective fair market value.
Dealerships approximate their vehicle costs by accounting for both the MSRP and their net cost to supply a vehicle.

What’s known as “holdback” can lower the vehicle’s true cost by repaying the dealership’s overhead and operating expenses such as maintaining the building and paying employees. Offsetting these expenses lets the dealer sell invoice-priced vehicles at a profit.

Kelley Blue Book pricing also reflect fair market value, but since used cars are decidedly different products, the presentation differs in that Kelley differentiates trade-in value from sale value. The trade-in is considered equal to a new car in the same make and model’s invoice price. On the other hand, retail value is considered equal to the original MSRP.

WHERE THEY DIFFER

Manufacturers formulate their vehicles’ invoice prices in a more transparent way than how Kelley Blue Book arrives at their values. A new car’s invoice price factors in each vehicle’s complete options package. The price is fairly uniform and understandable.

Kelley Blue Book determines their prices with a more fluid approach. Though their prices take manufacturer invoice prices into account, their used-car guides fluctuate with the prices that the market supports. As we’ve already discussed, several factors can cast that into flux, including local differences in demand. Also, Kelley Blue Book pricing provides a fairly reliable guideline to predicting your vehicle’s trade-in or sale value, but there’s always room for negotiation in either without mandated manufacturer pricing depending on individual factors. That’s without taking into account the money that a dealer will sink into detailing and reconditioning to make a used car ready for resale.

OPTION C: BLACK BOOK

There’s always a third pricing resource, albeit one more tailored toward very specific expertise.

Dealers and other automotive professionals often consult a subscription-based pricing service known as Black Book. This fairly pricey tool bases its pricing on sales at recent dealer auctions. Black Book takes into account many of the same considerations as Kelley Blue Book (make, model, year, condition, etc.) but auctions obviously present a different sales environment from standard private or dealer exchanges.

To make a long story short, it isn’t exactly the most useful guide for the Average Joe wandering off the street and onto a lot.

When it comes especially down to used vehicles, reality dictates that a used car or truck’s true market value will usually disappoint compared with its Kelley Blue Book number. Many sellers or traders optimistically (sentimentally?) rate their vehicles’ conditions much higher than the reality. There’s also the additional – but fiscally inconsequential – factor of owner sentimentality. With the market for any given vehicle having the potential to change daily and demand for it already potentially varying from one locale to the next, be prepared to bend and accept a different value from what you may have expected.

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