March 31, 2023

The Vehicle Pricing Authority

Almost every American is familiar with the name Kelley Blue Book. We hear it mentioned on every local car dealership TV commercial, and many of us rely on it when buying a car. Most of us, however, are unaware of its roots in Southern California.

In 1914, 17-year-old Les Kelley came to California from Arkansas.  With little education and few assets, the mechanically inclined Kelley made money by acquiring, reconditioning, and selling used cars. After putting himself through college, Kelley leased land from a Los Angeles car dealership and founded the Kelley Kar Company in 1918.

Starting with three Model T Fords and Kelley’s 13-year-old brother Buster, as the only employee, Kelley Kar Co. grew rapidly. Keeping pace with business, the company moved to successive L.A. locations in the next few years.

To acquire new inventory, Kelley circulated lists of desired vehicles, including prices he was willing to pay. The list quickly became the standard for valuation among local banks and dealerships. The enormous popularity of his lists prompted Kelley to publish the first Blue Book of Motor Car Values in 1926.

The name blue book had been used to refer to the social registry, a list of socially important people. Kelley’s publication outlived the social register, and the company eventually trademarked the term.

In those days, new car dealers did not sell used cars. Kelley aggressively acquired vehicles they had taken in trade, as well as cars directly from the public. Kelley’s main location was at the corner of Pico and Figueroa, which is now Staples Center. Along with satellite locations for mechanical and body repair services, Kelley Kar flourished to become the world’s largest used vehicle company.

Kelley’s success as a dealer was the product of many innovations over the years: When new Model Ts were produced only in black, Kelley sold hundreds of used cars painted pink; He purchased inventory and transported vehicles from the east coast; Kelley Kar offered its own insurance and car club membership as additional products for car buyers; Kelley even offered no-money-down auto loans to GIs returning from war-time service.

Les Kelley acquired a small Ford franchise during World War II. Marketing was a key to the dealership’s success, and Kelley was one of the first to utilize television to advertise. By the mid-1950s, Kelley’s Ford dealership was the largest in the world, and he decided to cash in on his achievements. Kelley was completely out of the vehicle sales business by 1962—he devoted himself full-time to his Blue Book publication.

Kelley Blue Book was now a national trade resource, expanding valuations to motorcycles, recreational vehicles, mobile homes, and new cars. Les Kelley passed away in 1990, succeeded by three generations of his family. The organization kept pace with technology, distributing its service by PC-based software, and eventually by internet.

In 1992, Kelley Blue Book launched desk-top software enabling dealerships to print used vehicle window stickers, similar to those legally required on new cars. Just like those Monroney Labels, this generated consumer confidence and stimulated vehicle sales.

The Blue Book consumer print edition debuted in 1993. The website, launched in 1995 was highly criticized for charging $3.95 for consumer vehicle valuations, and quickly went to advertising-based income while offering free valuations. Information on new cars expanded to include Manufacturer Suggested Retail Prices, dealer invoice prices, and average consumer prices, based on actual sales of similar vehicles.

JD Power and Associates estimate that today, one-third of all car buyers visit the Kelley Blue Book website, It is by far the most popular website of its kind, attracting more than seven million visitors per month. The Blue Book is still a cornerstone of the used vehicle industry as well.

Les Kelley’s heirs retired in 2,000, but the Irvine, California-based company still enjoys unprecedented innovation and growth. It is ironic that one of the most trusted and venerated American businessmen in history was basically… a used-car salesman!

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