Why KBB Can’t Be Used for Car Valuations

I’ve been in the car business for over 20 years, and one question that my friends ask often is whether Kelley Blue Book (KBB) is accurate. In this article, I share my experience of whether KBB can be trusted when buying or selling a car.

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KBB will give you a rough idea of what a car may be worth, but in the current market conditions, you can not use it to value a car or negotiate the purchase price.

• If you use KBB to price a car, you may list your car too cheap and give it away a hundred, if not thousands, below what it should be.
• If you use KBB to negotiate a purchase, the seller may laugh at you.

That’s been my experience, and I used KBB for the first couple of years in the car business. Soon I realized that KBB valuations often didn’t match the current car market price demands.

Do you know why KBB can’t be trusted for more than just getting a rough idea of the value of your car? If KBB were trusted, then banks would use KBB to value cars, but they don’t. Banks and insurance companies typically use NADA values.

Do you know who also knows the car market very well but doesn’t use KBB values?

• Car Dealers. The truth is that car dealerships know the car market better than anyone, using Manheim MMR to find out what cars are worth. Manheim provides wholesale prices and is only available to dealers.

No expert uses KBB or sees it as an accurate source, and I don’t think you should count on KBB to price your car. Instead, open a classified website such as CarGurus to find out how much other sellers are asking for a car with the same make, model, year, and approximate mileage as yours. Even a quick and easy option is to use a free service like CarGrpah to search car prices which pulls data from several classified sites.

In my opinion, KBB is used by novices or vehicle owners unfamiliar with the car market. It is also used by buyers who try to get a car cheaply when negotiating a price based on KBB trade-in value. Oh, I learned that you should never sell a vehicle based on KBB trade-in value unless you are OK with leaving money on the table.

KBB Trade-In Value

KBB trade-in value is based on how much a used car dealership will pay you for your car if you sell it to them or trade it in for another new or used vehicle. KBB trade-in values are not what you should sell a car to a private party. If you sell a vehicle based on KBB trade-in value, you will be selling your vehicle for hundreds or thousands of dollars less than what it is worth.

Don’t even go through the hassle of dealing with private buyers if you are OK with selling a car for what KBB trade-in value shows. Just take your vehicle to CarMax or reach out to Carvana and they will come and pick it up without asking you a thousand questions like private buyers do. You don’t need to buy a car from them.

Why KBB is not accurate

It is essential to understand that KBB is also based on past sales, not current market conditions. 

Even if KBB collects the data from DMVs, one thing to remember is that the sale prices recorded at DMVs often do not reflect the actual purchase price. I always get buyers who want to write less on the title than what they paid. Of course, my answer is always no, but some sellers may not care (even though this practice is illegal).

Not only should you not use KBB to price your car, but most importantly, do not lower your car price because a buyer is showing you a KBB printout. If a buyer negotiates the price based on KBB, open a classified website and display similar cars to yours and what they are listed for.

Of course, you should research before and price your car accordingly to the current local car market. You most likely bought or sold the car dirt cheap if you can buy a good car based on KBB trade-in value.

Here are a few reasons why one should not buy/sell a car based on KBB:

1. KBB does not account for the condition of the vehicle. Sure, you can choose Fair, Good, or Excellent, but that doesn’t consider the mechanic or electrical issues the car may have.
2. KBB does not take into account market fluctuations. Rember Cash for Clunkers or Chip shortage of 2021? Car prices shot up through the roof, and it would take KBB months to catch up with those market adjustments.
3. Banks do not use KBB for valuations or dealers, financial institutions, and businesses.
4. KBB claims to use unique algorithms that have never been disclosed. No statistical population and sampling have been revealed.
5. Based on past transactions, it does not reflect current market conditions. Transaction records may not always be accurate as people often report a lower purchase price to the DMV / MVA.

I found that Kelley Blue Book prices are lower than what you can get for your car after selling hundreds of vehicles. This was pretty apparent when I listed a couple of Mercedes E Class has for sale, and buyers would show a printout of Kelley Blue Book value, and yes, KBB was less than what I was asking for.

I had done market research for those cars and priced them lower than other similar models on the market. So when somebody tells me that Kelley Blue Book is even lower than what I was asking, I will ask them to keep looking and see if they may be able to find a Mercedes E-Class for what Kelley Blue Book is recommending.

After that experience, I started doing market research on my own before listing a car for sale instead of depending on the Kelley Blue Book. To do market research is very simple. All you need to do is go to your local online car site and look at four cars like yours with about the same you in miles once pool about ten cars and average my house and the asking prices. That will give you an idea of where you should price your vehicle. Of course, when somebody tries to buy the car, you will most likely negotiate and lower the price by a few hundred dollars or maybe even after $1,000. But the negotiated price in most cases was still higher than Kelley Bluebook recommended for private party evaluation.

For example, let’s say you want to sell a 2010 Mercedes-Benz S550 with 85k miles.

Picture from CarGraph.

Looking at the x-axis, you find your approximate mileage. Then go up until you hit the data cluster, then to the left (y-axis) to find the average price of those cars. In this case, the average price for this car would be $18,000. If you want to sell this car fast, you can list it for $17500 or even $16,800.

For the most part, Kelley Blue Book values are too low. And that’s the reason why Banks and dealerships do not use Kelley Blue Book. Instead, they use NADA, which is more accurate and typically closer to the current market condition. Based on our experience Kelley Blue Book does not correct prices when the market fluctuates.

The professionals don’t use KBB for evaluations because they don’t think it is accurate. Either use NADA or do your market research. Compare at least five vehicles like yours and what they are selling for. One tool I love as it takes the work out of me to different websites is the CarGrpah. Enter the year, make, and model, and you will see a graph of all the current cars listed for sale that are similar to yours. The data is pulled for multiple classified websites, including eBay, Craigslist, Cars.com, Cargurus, etc.

We hope you find the Why KBB Can’t Be Used for Car Valuations guide helpful. Check these troubleshooting and repair guides for more help on your vehicle.