Car dealers use Kelley Blue Book used vehicle pricing information to set used car prices and values. In the world of used car sales, there are no preset values, so a dealer is free to use whatever sticker price it wants for a used car. The different prices provided in the Blue Book can be used by a dealer as a negotiating tool to get you to pay more for a car, or it can be used by you to get a lower price.
Dealer Bluebook Pricing
From the 1950s to the early 1990s, Kelley Blue Book provided used car price information only to dealers. The data allowed them to estimate the current market value of used cars to be purchased and sold. In 1993, the company started to provide Blue Book pricing information to the public. However, the Blue Book pricing information that dealers purchase provides prices that differ from what you as a consumer will find on the Kelley Blue Book website. The dealer price information focuses on wholesale prices with greater detail concerning option and mileage values.
Suggested Retail Value
Both the dealer version and the online consumer version of the Blue Book will provide what is called the "Suggested Retail Value" for a specific used car. This is the value the dealer will use if the window sticker price is based on Kelley Blue Book pricing. For example, the dealer might use software from Kelley to print window stickers that include the Suggested Retail Value. This price will be well above the wholesale or trade-in value of the car, and the KBB website notes that the suggested retail price is intended as a negotiation starting point.
Estimating Dealer Cost
The dealer calculates the price it wants to pay for a used car using the wholesale value numbers from the dealer version of the Blue Book. From the online Blue Book data, the estimated trade-in value will be pretty close to what the dealer should have paid for a car that is on the lot and for sale. The dealer's actual cost for the car may be higher or lower, depending on where the car was purchased and how much money the dealer spent bringing the car up to an acceptable sales condition.
Dealers use the window sticker price -- which may or may not be the Blue Book suggested retail price -- as a tool to get buyers to start the negotiation at the highest possible value. In most cases, if the dealer sells the car at the sticker price, the profit will be much higher than normal. You, as a savvy car buyer, need to look up the trade-in value of the car and negotiate to get a purchase price as close as possible to your researched number. It helps to ignore the price on the window and work with numbers closer to the wholesale value.
Tim Plaehn has been writing financial, investment and trading articles and blogs since 2007. His work has appeared online at Seeking Alpha, Marketwatch.com and various other websites. Plaehn has a bachelor's degree in mathematics from the U.S. Air Force Academy.