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What is an Automotive (Vehicle) Appraisal?
An appraisal is a service whereas a professional appraiser, proficient in the particular field, evaluates the subject property and prepares a formal assessment whereas an opinion of value is rendered. ADE currently provides appraisals for various types of vehicles (i.e. cars, trucks, motor homes, travel trailers, motor cycles etc.) and services including, but not limited to:
Appraisal Clause Activities (insurance policy contract claim resolution)
Appraisal of Physical Damage/Correction (auto body repair, cosmetic repair, insurance claim)
Value Assessments (i.e. classic, custom, exotic value etc.).
Total-loss Replacement Valuations (pre-loss Actual Cash Value (ACV), Salvage Value etc.)
Estate Liquidation/Settlement Valuations
Insurance Coverage, (Stated value, Appraised value, Replacement value etc.)
Dissolution of Marriage (Divorce) Property Settlements
Bankruptcy Proceedings, (Chapter 11 reorganization, Chapter 7 liquidation etc.)
IRS Tax issues, (Donated vehicle, casualty loss deduction, depreciation etc.)
Real estate, fine jewelry, and art are among the most common items appraised. A motor vehicle appraisal is conducted much like other types of valuation appraisals whereas a qualified expert thoroughly inspects the subject vehicle, performs market research and opines to its monetary value range. The opinion rendered may not be the same by each and every appraiser as the appraised value is the expert opinion of the assigned appraiser and is based upon his interpretation of the vehicle’s condition, research and findings.
One needs be cautious in their selection of an appraiser to ensure competence. While in some instances the costs associated with the appraisal process may be recoverable, a basic rule to consider when seeking a qualified and competent appraiser is, not to base your selection of an appraiser on lower pricing. Remember: “Cheaper is Rarely Better and Better is Rarely Cheaper!”
2. How is the Appraisal Utilized?
An automotive (vehicle) appraisal is utilized to aid in establishing the value of a particular vehicle for a specified period of time. The appraisal may be used to certify a vehicle’s value to secure a loan, obtain-renew or update insurance coverage, meet IRS and/or help resolve a legal issue (donation, bankruptcy, divorce, estate liquidation etc.), to ascertain diminished value, and/or determine a vehicle’s pre-loss value when negotiating a total-loss recovery.
3. Why and When Might an Appraisal be Necessary?
An appraisal may be desired or required for various reasons including, but not limited to:
Verifying the condition of a vehicle prior to lease turn-in (no damage or if damaged, the reasonable cost of repair [Repair Assessment])
Valuation for true “residual value”
Determining a fair replacement value of a vehicle determined to be a total loss,
Establish loss (diminution) in value due to accident damages
Insurance policy contracts may have an “Appraisal Clause” which calls for both parties to secure the services of independent appraisers to aid in settlement of claim disputes. ADE offers its services to all parties which enables us to ADE our clients regardless if an insurer, consumer, legal professional, corporate or state official. ADE offers a true balance of clientele which ensures fair and unbiased activities which many professionals (who only serve either defendants or plaintiffs) cannot attest to.
In some instances, an appraisal may be required to obtain documentation to support an IRS deduction, valuation of a donation, value for adequate insurance coverage, collateral, legal requirements (i.e. bankruptcy, divorce, estate settlement) and other various issues.
4. Can Any Vehicle Be Appraised?
Most any property can be appraised. Our Auto Damage Experts have been called upon to appraise various vehicles including RVs, motor cycles, even trailers and other personal property and for many various reasons. Contact us with your specific issue for a no obligation consultation to see how we can best ADE you!
5. When Should A Vehicle Be Appraised?
The timing for having an appraisal done would depend upon the particular matter and any requirements. One needs to be cautious of issues such as court orders, IRS mandates, Insurance policy and/or contract wording and any statutes of limitations. Requirements often depend upon the need and the party requesting the appraisal. Should your particular issue involve a matter of the past, you may elect to seek a valuation for the property’s “pre-loss value” (as it was at the time of the loss) which can be much greater than that at a later date.
If your vehicle is in various stages of customization or restoration, you may be wise to have it appraised during the restoration in the event it is damaged or stolen before being completed. A vehicle may be worth tens of thousands of dollars prior to completion and it would behoove an owner to have it appraised during the investment process (mechanical, interior, body repair and refinishing etc.). This would be especially true when transporting the vehicle to a service provider whereas the vehicle will be in the care, custody and control of another. Possessing a current valuation and having adequate coverage will protect your investment and give you the piece of mind insurance is intended to provide.
6. Lease Termination; When Should the Appraisal be Performed?
Generally, most lease contracts stipulate the vehicle to be appraised no more than one month (30 days) before expiration of the lease agreement. The intent is to determine the subject vehicle’s “Fair Market Value” so the consumer and the lessor are better prepared to negotiate lease termination, residual buy-out, defending against miss-apportioned physical damages etc. to ADE in obtaining a fair and equitable end of lease settlement without unwanted and unwarranted surprises for either party.
In the case of an early termination, it’s best to have the appraisal performed just prior to actually turning the vehicle in to ensure that all issues are recognized and resolved beforehand. There’s nothing worse than receiving notice weeks after turn-in advising hundreds, or even thousands of dollars in damages/repairs are owed which can no longer be verified! Most all ADE appraisals will have accompanying documenting photographs to avoid such hidden and unexpected surprises.
7. Is an Appraisal Necessary When Donating a Vehicle?
The need for an appraisal when donating a vehicle, would depend upon the circumstances. Under current IRS guidelines (at the time of this writing), when a private party makes a donation of a vehicle valued at $5,000.00 or more, there are several requirements including but not limited to:
Obtaining a written appraisal by a qualified appraiser
The appraisal be prepared no less than 60 days before the contribution
The maximum deduction allowed is the vehicle’s “Fair Market Value”
The charity is a qualified organization
Your deduction cannot exceed 50% of your gross Income
Note that “Fair Market Value” may be considerably less than “Book Value”.
While not mandatory, an appraisal of a donated vehicle valued at less than $5,000.00 is considered prudent.
For additional information in this regard you may wish to visit: //www.irs.gov/pub/irs-tege/pub4303.pdf
NOTE: Auto Damage Experts does not provide legal or financial advice and suggest that should such counsel be desired that the IRS and/or a qualified professional familiar with such matters be contacted. For further clarification regarding the use of this site please visit our “TERMS AND CONDITIONS”.
8. Will The IRS Accept an ADE Appraisal?
Yes! ADE has performed hundreds of appraisals and because they meet all IRS certified appraisal requirements none have ever been questioned, declined or found to be unqualified. We adhere to and meet all Professional Automotive Appraisal Standards (e.g. USPAP-Uniform Standards of Professional Appraisal Practice) throughout the nation for local, state and national appraisal activities for various applications. ADE doesn’t merely offer a multitude of services, we provide confidence and piece-of-mind!
9. How is a Vehicle’s Appraised Value Determined?
An accurate appraisal begins with a consultation with the subject vehicle’s owner or representative to ascertain relevant information (i.e., specific needs, instruction etc.) followed by a thorough inspection of the subject vehicle by a qualified expert. The intent of the inspection is to determine its overall condition regarding function, appearance, equipment (factory and/or custom) maintenance (original, restoration, customized etc.) along with damage history and other information as may be pertinent to establishing its overall value.
Then a market search is conducted to determine the actual “Fair Market Value” to ascertain what other similar and comparable vehicles to the subject vehicle will command in the same general marketplace as possible (with appropriate deductions and additions whereas applicable).
A “Book Value” is then determined using various accepted published value guides (i.e. NADA (National Auto Dealers Association, Black Book, Kelly Blue Book, CPI- Cars of Particular Interest etc.).
A report of the research findings is then prepared, customized to the specific needs of the client and certified to permanently record the acquired information. Copies of the information are retained for a limited period of time (normally 1 to 2 years) to ADE you further should the need arise.
10. What is ACV Value?
“ACV” is an acronym for the term Actual Cash Value. As the term suggests the “Actual Cash Value” is the price of a vehicle that one could buy for cash at a specific time-frame. ACV is often computed by determining its “Replacement Cost” (RC) or the cash price required to buy an identical item and then adding for enhancements and/or by subtracting for depreciation based on age and condition of the property to be replaced to render a fair and accurate value for settlement purposes. One example may be; the cost of new plus or minus appropriate adjustments.
In the property and casualty insurance industry, “Actual Cash Value” or ACV is a term for the method of valuing insured property by determining the cost of repairing or replacing damaged property with other of like kind and quality (LKQ) and in the same physical condition; replacement cost less physical depreciation based on age, condition, time in use and obsolescence. Depreciation is based on age and condition.
Example: Let’s say you bought a new television five years ago for $600. Could you sell it for the same $600 today? Of course not, it may be worth only $150.00. If your television was stolen or damaged, that $150 is all you would get from the insurance company with an actual cash value (ACV) policy.
11. What is “Book Value”?
“Book Value”, in relation to automobiles, is value guides published listings (in print, data and/or Internet) and pricing of automobiles provided by independently owned and operated auto valuation organizations such as the National Auto Dealers Association (a.k.a. NADA) and Kelley Blue Book (KBB) Black Book, and Cars of Particular Interest (CPI) etc.
Such publications are generally well known, recognized and accepted by the automotive and financial sectors as guides and references for automobile pricing.
These reference guides normally offer several levels of pricing which may include manufactured suggested retail pricing (MSRP), retail, wholesale, loan etc. Additionally these value guides generally provide for methods in determining the economic impact (deductions or additions) for such factors as model packages (i.e. Limited, Touring etc.), condition, mileage, optional equipment etc.
It’s important to note that relying merely on a “Book Value” may not provide the basis for a fair and reasonable valuation of a vehicle’s value whereas, market conditions oftentimes play a direct and significant affect on a vehicle’s value at any given time or location. As an example; whereas a richly equipped high performance and/or massive gas guzzler may be significantly devalued in the marketplace during a time when gasoline prices increase significantly; at the same time, a small gas miser, with few amenities, may command a price much greater than a guide book’s listed retail value. This is known as market impact or market conditions which can and oftentimes do have a direct effect on a vehicle’s “”Fair Market Value” or true value.
12. What Is Comparable Or “Comp Value”?
Simply stated, “Comparable Value” is a measurement of worth based on the selling price of a similar item. Oftentimes comparable or “Comp” values are sought to aid in determining the value of a vehicle. Comp values are attainable through various resources including, but not limited to local, regional and national print, Internet and by consulting sales professionals.
13. What is “Fair Market Value” (FMV)?
“Fair Market Value” (FMV) is the price at which a property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.
Fair Market Value is a term in both law and accounting that is based on the economics term of “market value.” It is also a common basis for assessing damages to be awarded for the loss of or damage to property, generally in a claim under tort or a contract of insurance.
Fair Market Value is a judgment established by market research of similar vehicles (a.k.a. “comp”) in a specific market region during a given time frame. The goal is to determine at what price the subject vehicle would have sold for at a specific time in a given geographical area.
Auto Damage Experts employs various recognizable and reliable resources in locating comparable vehicles to effectively ascertain a vehicle’s true Fair Market Value regardless of how unique the property may be.
ADE offers decades of experience and commitment to excellence and provides its clients with the information they require when it is needed.
14. What Is “Replacement Cost” (RC)?
“Replacement cost” or Guaranteed Replacement Cost is the current price of a like-kind vehicle if it were to be purchased new, as opposed to the depreciated value of the vehicle at the time of the loss.
“Replacement Cost” takes into consideration the increase in the pricing of a vehicle. It is conceivable that over time, a fully and properly restored classic vehicle, providing it was maintained properly, would increase in value. Should a vehicle be insured under a “Replacement Cost” policy, and be stolen or destroyed, the owner would receive the cost to replace the vehicle at the time of the covered loss.
In the insurance industry, “replacement cost” is relative to a insurance policy provision which pays for the full cost of replacing damaged property without a deduction for depreciation and without a dollar limit. This policy is different from an actual cash value policy, which takes into account depreciation for lost and damaged items, if the damage resulted from an insured peril.
Whereas depreciation is an anticipated loss in value based on age and condition, appreciation is an increase in the market value of a property due to changes in market conditions or other causes, especially over time. Appreciation is the opposite of depreciation.
Example: Suppose you bought a new television five years ago for $600 and it was stolen or destroyed in a fire. With a “Replacement policy, If your television was stolen or damaged beyond repair you would receive the amount necessary to buy a replacement like, kind quality television at the current market price, which may be more or less than the original $600.00.
15. Is an Inspection Required for an Accurate Appraisal?
A physical inspection of the vehicle, by a qualified expert, is the only effective method by which to ascertain the true condition of a vehicle as would be necessary to assess an accurate value which can be certified by an expert and accepted by a third-party. It would be like to purchasing a vehicle by mere photos without inspecting it or securing a Pre-Purchase Inspection (PPI).
Contact us to discuss your specific needs and what service(s) are best suited for your particular situation.
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