Appraised Vehicle Value Justification Method
The method used to determine the value of a vehicle is a three step process. The first step is to establish the base value. This initial base value is established by consulting a vehicle value guide such as NADA Guides, Gold Book, Old Car Price Guide and Hemmings Value Guide.
In this step an average price is calculated (as we generally do not know the original condition of the vehicle if it has been modified, upgraded, restored etc) considering a vehicle price in fair, average or good condition. The base value of an unrestored, original vehicle would be determined by it's present condition.
The appraised base value is then calculated from this established value by percentage. As an example, a vehicle with an established base vale of $20,000.00 at 100% would attain an appraised base value of $18,400.00 at 92% which is calculated from the rating of all parts and components on the vehicle.
The second step is then accomplished by listing any/all new, rebuilt, modified, custom parts and components installed. The value of this new part or component is then calculated by it's new price (Substantiated by an owner receipt) less the cost of the original part cost and it's age. As a simple example: a new installed bumper at the cost of $200.00 – less the price of the original average rated bumper of $40.00 would determine a price of $160.00 which would then be the listed price. Also to be considered would be the age of this new bumper which could be depreciated at up to 8% per year – meaning if the bumper has been on the vehicle for 2 years it would be further devalued by up to 16% which would then establish a price of $134.40.
In most cases, establishing the price of any newly installed parts or components is determined only by the actual cost of the part. Installation (Labour) is/will not be considered unless it is part of the process such as bodywork/paint, upholstery or component building such as engine or transmission. Devaluation is also applied (as outlined above) in these area's as well as an average shop rate is determined by estimated hourly rate from 3 different shops.
The third and final step to determine a vehicle appraised value is established by adding the averaged base value and the total optional value. In some cases, value is also added using the 1% low mileage credit for low mileage vehicles.
In all cases, it is important to ensure that when optional parts, components are priced and listed, that the appropriate deductions are considered and applied from the established original part cost so that in no event would a part, component or labour fee cost/price be applied under both conditions.