Car dealers determine the value of used cars using a combination of industry standard pricing information provided by entities like the Kelley Blue Book as well as the needs of the dealership. Price can be above standard value in an attempt to turn a profit or below to clear inventory.
The Kelley Blue Book was started by auto dealer Les Kelley during the early days of automotive production. As the automotive market was young and general knowledge and consensus of vehicle pricing was disjointed and difficult to locate, Kelley began a publication that set a base price and depreciation system for all vehicles. The guide began as a tool for auto dealers and other professionals, but in time entered into general use by the public. The formulas for determining price and depreciation are used as a primary industry marker for car dealers to determine how much to list used cars sold on their lots.
It is common for dealers to use the Kelley Blue Book prices as only a starting point and not a definitive price. Most dealers increase the price of used cars so that selling it turns a profit instead of merely recouping the cost of the initial purchase.