NADA Valuation Books Mark 70 Years

Guest Feature From NADA By Leigh Glenn February 2003

Of all NADA’s activities to help its members, and the auto industry as a whole, the Official Used Car Guide is probably the best-known. Which isn’t surprising, considering that the book celebrates its 70th anniversary this year.

"So many people outside the automotive industry are aware of the Used Car Guide," says NADA chief administrative officer Bruce Kelleher, who began his career at NADA in 1966 as assistant editor of the publication. Lenders at banks and credit unions, attorneys, CPAs, insurers, government agencies, dealers, and people looking to sell or buy used vehicles all turn to the Guide for current, accurate values.

NADA chairman H. Carter Myers, III, Colonial Auto Center, Charlottesville, Va., who will highlight the book’s anniversary at the convention this month, is one of them. "It’s the only book I used growing up. I’m not sure there was another book."

And the Guide has kept up with the times. As recently as a decade ago, used-car managers and sales staff carried the book in their back pockets. Today, they need only download the info they get, via electronic subscription, to a hand-held device. The Guide has indeed come a long way, baby.

BORN IN TOUGH TIMES

It was 1933 and the United States was deep in depression. To help, the Roosevelt administration created the National Recovery Administration (NRA). And NADA created the Used Car Guide.

The NRA, under the National Industrial Recovery Act (NIRA), set up codes of conduct for hundreds of industries, including automotive—deemed a key player in the recovery. But the used-vehicle marketplace was chaotic. Some prices were inflated, others deflated. The credibility of the industry, as well as new-vehicle prices, was at stake.

In October 1933, President Roosevelt signed the Code of Fair Competition for the Motor Vehicle Retailing Trade, prompting NADA to develop impartial, accurate, and credible reporting of used-car values. Two months later, the first N.A.D.A. Official Used Car Guide was published.

The data, of course, were obtained from dealers. The March 10, 1934, N.A.D.A. Bulletin, with a sample used-car sales report, showed dealers what to include when they mailed their reports to NADA’s then-headquarters in St. Louis. The bulletin admonished them to remember that the Guide’s value depended entirely on what they supplied. "Too high allowances will result in continued used-car losses, and too low allowances might adversely affect new-car sales."

In 1935 the Supreme Court ruled NIRA unconstitutional on the grounds that it wrongly delegated Congress’s lawmaking authority to the NRA. But the Guide continued its mission—and has for 70 years.

NO MORE WHIPSAWING

One reason for its success is the quality of the info. Many of the vehicle prices on consumer Web sites don’t necessarily reflect what a product’s really worth, since they are beholden to one entity or another, says Guide Co. executive director Scott Lilja. So would-be buyers come to showrooms with those prices in mind and negotiations fall apart.

Unlike other sources, the Guide does not put vehicles into large classifications. For instance, the Jeep Grand Cherokee and Toyota Highlander share a segment, but the Grand Cherokee’s been around longer and in larger volumes, whereas the Highlander is newer and has had few incentives. So if they were depreciated at the same level, "you’d be doing one or the other a disservice," says Lilja.

Guide analysts consider not only dealer, automaker, and wholesale data, but also currency, interest rates, incentives, consumer preferences, and production. During the late 1990s GM strike, for example, supply shrank and dealers began overbidding to ensure they’d have enough stock. But just because they overbid doesn’t mean that that should translate to the consumer, says Lilja. "You’ve really got to ferret through it and not overreact to the data."

CH-CH-CH-CH-CHANGES

The Guide’s ability to react to changes goes to its very structure. Five years ago, the Guide had no e-presence. Today, it’s an e-business. But values didn’t simply migrate online. "In this market, we’re not just a valuation company," says Lilja. Guide Co. wants to help dealers successfully market the right products to the right buyers at the right time, he says.

So, in addition to its valuation tools, the company is launching a new-car configurator and a dealer lead product as part of its Total Dealer Solutions package. The configurator is for consumers, whose zip codes will prompt "geo-targeted" ads from local dealers with specials or service discounts. The leads product will price high-quality leads (sifting out duplicates and junk) inexpensively.

Nailing that goal has partly been the work of Don Charbonneau, Charbonneau Car Center, Dickinson, N. Dak. He has chaired NADA’s Guide committee for four years. NADA’s committee chairmanships typically change year to year, but the Guide’s revamp needed continuity, hence the extended term. Plus the committee has been authorized to make decisions, even those regarding money, without going through the usual chain of command. "The Guide book, as I see it, is a business," says Charbonneau. "In a business, you have to make decisions and can’t always wait for a board meeting." And the Guide’s success is critical to the association’s success, as its revenues fund a variety of services throughout NADA.

THE NEXT 70 YEARS

The N.A.D.A. Official Used Car Guide is creating a 10th-region book, for the huge California market, with Costa Mesa­based N.A.D.A. Appraisal Guides, which handles non-auto values and with which Guide partnered in 1975. The object, says Charbonneau, is to become more relevant to dealers there. Future initiatives should include more customized products to help Guide customers better manage risk as well as expansion outside the United States.

Assuming the Guide stays true to its roots—being the best at putting together figures—and continues to have strong executive and board leaders, 2003 NADA chairman Alan Starling says he is confident it will be able to meet the challenges of the marketplace, including all the people who grew up accustomed to logging onto the Net for information.

Leigh Glenn is associate editor of AutoExec.