COURSE 2
How to Have a Sales Conversation about Valuations
This second course in our series explores how the Kelley Blue Book® Price Advisor provides market reflective pricing guidance for car buyers.
Learn About Valuations
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Kelley Blue Book® Valuations
Did you know that car shoppers spend twice as much time looking at the attributes of cars they are interested in than the price1 of those cars? And yet they say that price is their number one concern1.
Why is that? And more importantly how can we help?
Is it about getting the best deal and beating the dealer like some information sources suggest? Or is it about something else?
When customers are asked by friends how much they paid for a vehicle, they want to feel confident they got a fair deal.
12016 Cox Automotive Car Buying Journey Study
The Kelley Blue Book® Price Advisor provides market reflective pricing guidance for car buyers
The Principles Behind Valuations
The guiding principles for vehicle valuations of Kelley Blue Book are to remain neutral to the transaction by providing timely and local values. These values help remove friction from the sales process by easing the online to dealership experience.
All about the Values Progression
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Kelley Blue Book® Trade-In Range
Kelley Blue Book’s estimate of what a consumer can reasonably expect to receive this week based on the style, condition, mileage and options of the vehicle when they trade it in to a dealer. However, every dealer is different and values are not guaranteed.
Kelley Blue Book® Auction Value
Kelley Blue Book’s estimate of what a vehicle is expected to sell for at a wholesale auction. It assumes the seller has properly disclosed the condition of the vehicle. It does not include buyer’s fees or the buyer’s transportation costs and assumes the vehicle has not yet been fully reconditioned, inspected, and prepared for retail sale.
Kelley Blue Book® Lending Value
Kelley Blue Book’s benchmark value for wholesale and retail lenders. Based on the Kelley Blue® Book Auction Value, the Kelley Blue Book® Lending Value assumes that the vehicle is in good to excellent condition, fully reconditioned, inspected, and prepared for retail sale.
Kelley Blue Book® Fair Market Range (Used Car)
Kelley Blue Book’s estimate of what a consumer can reasonably expect to pay this week in their area for this year, make and model used vehicle with typical miles and configured with their selected options, excluding taxes, title and fees, when buying from a dealer. Each dealer sets and controls its own pricing.
Kelley Blue Book® Fair Market Range (Certified Pre-owned)
Based on dealers’ asking prices, the Fair Market Range is Kelley Blue Book’s estimate of what a consumer can reasonably expect to pay this week for this year, make and model Certified Pre-Owned vehicle with typical mileage and configured with their selected options, excluding taxes, title and fees. Each dealer sets and controls its own pricing.
Kelley Blue Book® Fair Market Range (New Car)
Kelley Blue Book’s estimate of what a consumer can reasonably expect to pay this week in their area for a vehicle configured with their selected options, excluding taxes, title, fees and any available rebates or incentives. Each dealer sets and controls its own pricing.
Manufactured Suggested Retail Price (MSRP)
The MSRP, or Manufacturer’s Suggested Retail Price, is the price set by the manufacturer. MSRP includes destination charges and minimum required equipment, but excludes service and handling fees and state and local tax, title and license fees. MSRP is a reference point for negotiations, however dealers can choose to sell a vehicle above or below its listed MSRP.
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Valuations: Marketplace Dynamics
The Kelley Blue Book Price Advisor uses data from many of these sources to update prices on a weekly basis. That’s how you get the market reflective price range for any fully configured vehicle.
The foundation for the Kelley Blue Book® Fair Market Range is based on a number of different factors including: actual recent sales transactions of fully configured vehicles, local geographic data and on used vehicles includes consideration of mileage, color, age, and demand to determine the Kelly Blue Book Fair Market Range.
The uniqueness of each region and its variables along with actual weekly transaction data from each region translates into the Kelley Blue Book® Fair Market Range for each vehicle in that region.
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Below are examples of some of the data points reflected by the marketplace that impact the Kelley Blue Book® Price Advisor
Local Geographic Data
- Actual vehicle transactions from the 101 regions
Aggregated New & Used Vehicle Transactions
- Aggregated new vehicle transactions from new vehicles sold within a weekly timeframe
- Aggregated used vehicle transactions from used vehicles sold within a weekly timeframe
Mileage, Color, Age, Condition and Demand
- The actual mileage of a particular vehicle may affect its value
- Color may influence price due to demand
- Age of vehicle will influence its value
- Condition affects the vehicle value; the better the condition, the higher the value
- Demand of a certain make and model will influence the vehicle’s value
Economic Variables
- Variables like fuel cost, regional economic factors, season all affect the value of a vehicle
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Valuations: Vehicle Lifecycle
How Kelley Blue Book® Values represent varying perspectives over the life of a vehicle
Valuation is a term that refers to the value at a particular point in the vehicle lifecycle. For example, Kelley Blue Book® Auction Value represents an estimate of what a vehicle is expected to sell for at a wholesale auction.
Whereas, Kelley Blue Book® Trade-In Value is an estimate of what a consumer can reasonably expect to receive when they trade that vehicle into a dealer.
A Kelley Blue Book® Fair Market Range (New Car) is Kelley Blue Book’s estimate of what a consumer can reasonably expect to pay during a particular week in a vehicle’s area for a specific year, make, model, MSRP vehicle excluding taxes, title, fees and any available rebates or incentives.
Clearly understanding and being able to discuss new and used car valuations makes up a large part of the car selling and buying process. You never know what specific questions might come up in customer conversation so we put together a deeper dive on valuations.
Clearly understanding and being able to discuss new and used car valuations makes up a large part of the car selling and buying process. You never know what specific questions might come up in customer conversation so we put together a deeper dive on valuations.
Used Vehicle – 2010 Malibu
Kelley Blue Book® Trade-In Value/Range
See Definition
Kelley Blue Book’s estimate of what a consumer can reasonably expect to receive this week based on the style, condition, mileage and options of the vehicle when they trade it in to a dealer. However, every dealer is different and values are not guaranteed.
Source: Auction Sales Transactions / Trade-In Marketplace Offers / Dealership Appraisals…calculated by taking the Auction value and then subtracting fees a dealer would have to pay to sell this car at auction, any transportation cost to get it to the auction and any overhead.
Kelley Blue Book® Auction Value
See Definition
Kelley Blue Book’s estimate of what a vehicle is expected to sell for at a wholesale auction. It assumes the seller has properly disclosed the condition of the vehicle. It does not include buyer’s fees or the buyer’s transportation costs and assumes the vehicle has not yet been fully reconditioned, inspected, and prepared for retail sale.
Source: Auction value is calculated by taking into consideration actual auction transactions from Manheim and other auctions and taking into consideration macroeconomic factors ( gas prices, interest rates ) that could affect the market for the upcoming week
Kelley Blue Book® Lending Value
See Definition
Kelley Blue Book’s benchmark value for wholesale and retail lenders. Based on the Kelley Blue Book® Auction Value, the Kelley Blue Book® Lending Value assumes that the vehicle is in good to excellent condition, fully reconditioned, inspected, and prepared for retail sale.
Source: Auction sales transactions plus auction buyer fees paid by dealer, transportation costs to get to dealership and reasonable reconditioning costs incurred by dealer to prepare vehicle for resale.
Kelley Blue Book® Fair Market Range (Used Car)
See Definition
Kelley Blue Book’s estimate of what a consumer can reasonably expect to pay this week in their area for this year, make and model used vehicle with typical miles and configured with their selected options, excluding taxes, title and fees, when buying from a dealer. Each dealer sets and controls its own pricing.
Source: Dealership Retail Sales Transactions
Kelley Blue Book® Suggested Retail (USED)
See Definition
The Kelley Blue Book Suggested Retail Value is representative of dealers’ asking prices. It assumes that the vehicle has been fully reconditioned and takes into account the dealers’ profit and costs for advertising. The final sale price will likely be less, depending on the car’s actual condition, popularity, warranty and local market factors
Source: Used retail listings
Kelley Blue Book® Fair Market Range (Certified Pre-owned)
See Definition
Based on dealers’ asking prices, the Fair Market Range is Kelley Blue Book’s estimate of what a consumer can reasonably expect to pay this week for this year, make and model Certified Pre-Owned vehicle with typical mileage and configured with their selected options, excluding taxes, title and fees. Each dealer sets and controls its own pricing.
Source: Used retail listings and manufacturer CPO program details.
New Vehicle – 2016 Malibu
Invoice
See Definition
The invoice price is the price the manufacturer charges its dealers for a new vehicle, but it does not necessarily reflect the total price actually paid by the dealer for the vehicle. The Invoice price includes destination charges, but doesn’t include dealer advertising costs or costs for selling, preparing, displaying or financing the vehicle. Also, Invoice price does not include factory-to-dealer incentives and other factors which can reduce what the dealer pays for the vehicle.
Source: all prices established by OEM ( Original Equipment Manufacturer)
Kelley Blue Book® Fair Market Range (New Car)
See Definition
Kelley Blue Book’s estimate of what a consumer can reasonably expect to pay this week in their area for a vehicle configured with their selected options, excluding taxes, title, fees and any available rebates or incentives. Each dealer sets and controls its own pricing.
Source: Dealership Retail Sales Transactions
Kelley Blue Book® Residual Value
See Definition
In vehicle leasing, the Kelley Blue Book®‘s Residual Value is Kelley Blue Book®‘s forecast of a vehicle’s future market value. In particular, the residual value is used to establish the value of a vehicle at the end of its lease term. Lease terms usually range between 24 and 60 months.
Manufacturer’s Suggested Retail Price (MSRP)
See Definition
The MSRP, or Manufacturer’s Suggested Retail Price, is the price set by the manufacturer. MSRP includes destination charges and minimum required equipment, but excludes service and handling fees and state and local tax, title and license fees. MSRP is a reference point for negotiations, however dealers can choose to sell a vehicle above or below its listed MSRP.
Source: all information established by OEM ( Original Equipment Manufacturer)
Test Your Knowledge
Here’s an opportunity to test your knowledge about Valuations
This short Knowledge Check is not graded and you will get immediate feedback as you complete each question. You may answer any or all of the questions as you go.
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The Importance of Valuations
There is an art and science to how the Kelley Blue Book data scientists work with numbers to get reliable price ranges.
Art and Science of Valuations
Statisticians, data technologists, automotive industry and field analysts at Kelley Blue Book combine quantitative and qualitative information to predict forecasts and set values. This happens weekly so you get up-to-date information available for 101 regions across the country.
Kelley Blue Book uses predictive analytics and industry and field analysts to review trends and forecasts so you get up-to-date information. You help customers understand how the Kelley Blue Book® Price Advisor provides an improved buying experience.
When customers can see what data goes into the Kelley Blue Book® Price Advisor and then see that there is a Kelley Blue Book® Fair Market Range for each vehicle, it allows you to shift the focus from price to talking about how a customer may like their vehicle equipped.
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The Conversations You Want to Have
Kelley Blue Book provides current and localized valuations making it much easier to talk about price
When you listen to your customers, understand your current, local marketplace and vehicle valuations – and use the Kelley Blue Book® Price Advisor, your customer should have a more enjoyable car buying experience.
Mutual understanding of valuations and current market data make it easier to talk to customers about the price of almost any vehicle.
Customers are able to understand what data is used to determine price ranges of a vehicle within its lifecycle, giving your customers peace of mind about the reliability of the Kelley Blue Book® Price Advisor.
Customers are reassured that they are getting a fair price and you can spend more time getting to know your customer’s needs and helping them find the right vehicle.
At Kelley Blue Book We Are Here To Help
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