The National Automobile Dealers Association (NADA) is a Tysons, Virginia-based organization specializing in producing vehicle pricing guides for consumers and businesses. In addition, NADA focuses on providing information, best-practices resources, and training to automotive-related businesses.
In many ways, NADA Guides are a foil to the much-touted Kelley Blue Book (KBB). Consumers have long relied on KBB for an accurate understanding of what their cars are worth. When comparing NADA and KBB, however, it's fair to say that NADA Guides place a greater emphasis on information useful to those involved in the wholesale automotive trade. But, NADA does offer consumer information as well.
What are NADA Guides?
NADA is an association that’s been around since 1917, with its guides first published in 1933. Over the years, the operation has expanded into the online space to become one of the largest resources of its kind for businesses and consumers.
Using a set of simple criteria, NADA publishes numbers meant to show the vehicle's wholesale price. For this reason, the guide remains more useful to dealerships and auto financiers than the average consumer.
While NADA continues its business-to-business operations of publishing its guides, producing software, and developing web and data services, its consumer arm is being spun off to J.D. Power as the auto analytics firm seeks to take on KBB. It's a move that further cements NADA guides as an instrument more for automotive businesses than anything else.
How Does NADA Value Vehicles?
Broadly speaking, NADA uses three main criteria to determine vehicle valuations: local market demand, wholesale pricing, and real-time retail market prices.
Local Market Demand
The first factor looks at the amount of local demand for a particular vehicle. This regional information is critical on a business level because individual markets have unique needs and preferences. For instance, there's less interest in an off-road vehicle in the middle of a city. It's an approach that enables NADA Guide pricing to align with actual market conditions where the numbers are being used.
Wholesale valuation is arguably the most important aspect because auto retailers need to know this information to eventually set their selling prices. Sticker prices on cars can be pretty complex, with various dealerships using different strategies to make a profit. Some may use the wholesale price as the sticker price with the hopes of upselling buyers with accessories and other add-ons. Other operations might mark up wholesale prices to ensure an upfront profit. Some dealers may combine both strategies.
Real-Time Retail Market Prices
Real-time market pricing enables a dealer to stay competitive and profitable. Plus, knowing this information can determine if a trade-in is best suited for a dealer's pre-owned lot or an auction.
Who is Using NADA Guides?
The primary users of NADA Guides are car dealerships and related businesses. The online business-to-business information provided by NADA doesn't just stop at pricing guidelines. It's an association that provides dealers with business-focused resources, best practices training, and other retailer essentials.
As mentioned earlier, NADA Guides provide critical resources for car dealerships to determine competitive pricing and develop effective business strategies. Localized information is beneficial in the creation of a targeted inventory. For example, if high-margin Jeep Wranglers are in-demand, it makes sense to seek out wholesale opportunities for these off-roaders. At the same time, knowing the right numbers means a reduced risk of an unbalanced inventory mix.
Lenders also need to be aware of the real value of financed cars. In addition, NADA Guide numbers help these businesses develop competitive financing deals that are appealing to consumers. And correct valuation numbers are also essential to auto leasing companies.
Although consumers are more likely to turn to KBB for car values, this will likely change as J.D. Power gets into the game. It's a move that will also put the NADA name in front of more people outside the car business.
NADA Guides Vs. KBB - Which is Better?
It's difficult to declare a clear winner when comparing NADA Guides to KBB. The answer really comes down to who is using the information. Let's dig into this further to understand the differences between the two platforms.
Vehicle condition is arguably the most significant area where NADA and KBB differ. When creating a value for a used car, NADA doesn't factor in the vehicle's exact condition as part of its pricing. It assumes that the car is in good condition without any significant defects.
On the other hand, KBB's vehicle valuation incorporates a car's condition, such as "rough trade-in," "average trade-in," or "average trade-in." Why does NADA assume all cars are clean?
The organization doesn't provide a detailed explanation, but looking at the retail automotive sector (the biggest customer for NADA Guides) offers some reasoning. In general, a dealer isn't going to sell a car in poor condition (hopefully). Instead, NADA allows the retailer to make discretionary decisions about a sub-par vehicle. In this way, the cost to bring a car up to "good" standards gets deducted from the NADA price.
Another differentiator between NADA and KBB is the type of pricing. For NADA, the wholesale price is at the center of everything. Yet, KBB takes a broader approach by offering trade-in, private party sale, certified pre-owned price, and other variations. It's understandable given KBB's consumer orientation, and the same can be said for NADA and its retailer customer base.
These distinctions also explain why average KBB prices may be lower than what's presented in NADA Guides. Different audiences yield different results. In the end, it comes down to personal or business needs. NADA Guides are useful to automotive professionals, and KBB information appeals to consumers.