What are blue book values?

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When considering selling or trading in a vehicle, as well as purchasing a used automobile, one of the main obstacles is determining a price for the car or truck. Many people turn to the automobile’s blue book value to help determine the vehicle’s current market value – as well as to set the transaction price and maximum loan amount.

But what exactly is the blue book value?

The blue book value that is placed on a vehicle can be useful to both buyers and sellers, as it provides insights into the recent asking prices for similar vehicles. At its core, the blue book value encompasses the quote price for both new and pre-owned vehicles. It has become the most used method for vehicle price quotes in the United States today.

It is also typically used in establishing a benchmark for assessing the market value of a vehicle that has been involved in an accident. By knowing how much a damaged vehicle is currently worth, for example, the car owner can determine whether or not the vehicle is worth repairing. If the cost of the repairs greatly exceeds the price of a similarly aged vehicle of the same model and type, then it may not be worth repairing the vehicle. It would be more cost-efficient to simply buy a used car.

In the past, blue book valuations were only made available to those who worked in the auto industry. However, since the 1990s, this information has been made available to consumers as well – both online and in a handy book format.

The history of the Kelley Blue Book

What we commonly call the blue book value has been in existence for approximately 75 years, since the Kelley Company worked to bring valuation information on popular vehicles for both sellers and buyers.

The company’s origin dates back to 1918, when its founder, Les Kelley, began selling used cars. As he developed his business, he began printing lists of the used cars that he intended to purchase – as well as the amount that he intended to pay for these vehicles.

Mr. Kelley sent his lists to auto dealers and banks, primarily to help re-stock his inventory of used cars. Over the years, many in the auto industry began to rely on Kelley’s price valuations in order to obtain an accurate appraisal of pre-owned vehicles. In 1926, the first list of these valuations was published as a booklet.

By the 1980s and 1990s, the Kelley Blue Book started using computer software to track vehicle prices. Today, both consumers and auto industry professionals can access up-to-date information on vehicle prices and estimates via the Internet.

Determining the blue book value of vehicles

The blue book value of a vehicle represents a combination of several factors that go into estimating how much that automobile is worth. These criteria can determine the estimated wholesale and recommended retail price of a vehicle, so that the seller and the potential buyer can get a better idea of what it is worth prior to enacting a transaction.

There are a number of different factors that go into determining blue book value. These include:

  • Make and model of the vehicle
  • Model year
  • Mileage
  • Condition
  • Additional features, equipment, and accessories

But the primary factor for today’s blue book value is the most recent data on recorded asking prices. In fact, the Kelley Blue Book value is based on actual transaction information that is analyzed from a number of different events, including vehicles that are sold at wholesale auctions, by independent dealers, by franchised dealers, from rental and fleets, from financial institution lessors and private party transactions between individuals.

The final values are then determined via a proprietary editorial process that begins with an in-depth analysis of all of the collected data, as well as current economic conditions, historical trends, developments in the auto industry, location and seasonality.

In many cases, the same vehicle may have different blue book values. These different values may include:

  • Kelley Blue Book Private Party Value – This is the amount that a purchaser of a vehicle can expect to pay when they are buying a pre-owned vehicle from a private party.
  • Kelley Blue Book Trade-In Value – This represents the amount that a consumer may expect to receive from a dealer when they are trading in a vehicle.
  • Kelley Blue Book Suggested Retail Value – This amount represents the value of what a dealer may ask for a pre-owned vehicle. This is typically also considered to be the starting point for the negotiations that take place between a buyer and a dealer. It is important to note that this is different from the Kelley Blue Book Certified Pre-Owned Value, which represents the suggested price that a dealer may ask for vehicles that are covered in the automaker’s CPO, or Certified Pre-Owned, program.

How automobile lenders use the blue book value

Auto loan lenders often use the blue book value of a vehicle in determining whether a buyer is paying an accurate amount for a vehicle. Whether providing new vehicle financing, car title loans or automobile repair loans, the blue book value helps the loan provider ensure that there is sufficient collateral for the automobile loan being provided to the borrower.

Since auto loans are considered secured financing, the collateral’s worth becomes an integral part of lowering the lender’s risk exposure. If the buyer defaults on the loan, the lender will repossess the vehicle and sell it to recoup the outstanding loan balance, unpaid interest and applicable fees.

The blue book value is particularly important when financing the purchase of used vehicles or refinancing an existing car loan. Lenders will examine the current blue book value for the used vehicle and usually only finance a portion of the current value.

The difference between the loan amount and the asking price is what the used car buyer will have to cover – usually by increasing the down payment.

Alternatives to The Kelley Blue Book

In addition to the Kelley Blue Book, there are other alternatives for determining the estimated value of a vehicle. These include the NADA Guide and the Black Book. The NADA Guide is considered to be the official data guide that is issued specifically to dealer members of the National Automotive Dealers Association trade group. This book provides industry data, such as dealer retail sales and information from over 500,000 different sales and market data points.

Disclaimer: NetCredit is a direct personal loan provider and does not provide financial advice, nor does it vouch for any vendor or service mentioned on our NetCredit personal finance blog or online consumer loan glossary. Always research and perform due diligence on any service provider or vendor before deciding to use them, and we recommend that you speak with a financial advisor regarding all decisions that will affect your finances.

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