Used Car Haggling
Getting the best possible price for a used car can be a tricky subject. Car dealerships mainly receive their used cars from trade-ins and from wholesale auctions. Dealerships then add the costs associated with conditioning the car to be sold on their lot. Of course they add further markup so they can make a profit. Below are the pricing guides used by car dealerships to find the value of used cars. We crunched the numbers on several used cars to determine which pricing guide is most beneficial to the consumer.
Kelley Blue Book
To determine the value of a used car, many dealerships and consumers rely on the Kelley Blue Book Value. The Kelley Blue Book Value favors dealerships as they add in costs a dealership may incur in selling a car. The Kelley Blue Book trade-in value is also LESS than the wholesale price of the car, which means a dealership who gives you trade-in value for your car can turn around and sell the car for wholesale value and still make a profit. Now consider the fact that the retail blue book value is often thousands of dollars more than the trade-in value. This means that a dealership makes a hefty profit if they take a car for trade-in value and sell it for the Kelley Blue Book retail value. The Kelley Blue Book private party value is between the trade-in and retail blue book value and is a more reasonable price for a used car. When negotiating with a dealership, your goal should be to knock the price down close to the private party value. If you don't like the price they're offering for their used car and they won't lower the price, the best thing to do is walk out. They need your business, not the other way around. Most likely they will catch you at the door because they realize you may buy your car at a competing dealership. More on the Kelley Blue Book Value.
Black Book
Another price guide(book) used to assess vehicle value is the Black Book value. The Black Book value is determined by wholesale auction prices. In the above paragraph we discussed the Kelley Blue Book and how the Blue Book trade-in value is less than wholesale value. The Black Book is based on wholesale value so the Black Book value is a slight improvement for consumers since they will get a bit more for their trade-ins(NADA pays out the highest for your trade-in). Prices are only available for retail and trade-in value if using the Black Book while the Kelley Blue Book also includes a private party value. The Black Book retail value for a used car is also lower than that of the Blue Book or NADA's Orange Book. So for the consumer, the Black Book would be the pricing guide you would hope the dealership used if you were buying a used car from them.
NADA Orange Book
We're not done yet. The NADA (National Automobile Dealers Association) used car guide(Orange Book) is also used by some dealerships to assess trade-in value. The NADA Orange Book gives pricing for wholesale and retail values. The Orange Book typically quotes the highest price for your trade-in, but the Black Book beats it out for retail pricing from the consumers perspective.
The Winners
To quickly summarize our findings when comparing the three different books(or price guides), the Black Book quotes the lowest retail price for a used car and the NADA Orange Book quotes the highest price for your trade-in. Now if only you knew which book your local dealerships used. If you're lucky, they may print out the report generated for your car, allowing you to know for sure which pricing guide they used.
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