ACCEPTABLE DAMAGE CONSIDERED IN VALUATION GUIDES

Are the expectations of a used 1993 vehicle in excellent condition the same as those of a used 2008 vehicle in excellent condition?  Valuation guidebook editors are asked that question on a regular basis.

The answer—no.  Well, maybe.  Well, yes.  OK.  It’s hard to say.  There have been attempts to quantify acceptable damage for various model years with charts and tables in some guidebooks.  Of course, like everything else that goes into producing a guidebook, arriving at a relevant solution is more complicated than it may first appear.

It’s safe to assume that a ’93 vehicle will have more wear on it than a 2008.  The question is, ‘how much more?’  Is it OK for a ’93 to have six door dings?  Five?  Maybe the back door has been painted.  Maybe there’s a rust bubble.  It’s almost impossible to quantify this.

Try this scenario.  Say the guidebook says the acceptable amount of damage on a ’93 vehicle is four door dings, 25 small rock chips in the front header, and one piece of chewing gum in the back carpet.  Now, say the vehicle that needs to be priced was clipped by a train and rolled into a ravine full of swamp water.  The vehicle was fixed and painted-up and the interior was replaced, but it still has an aura that something’s not right.  But thanks to the new bodywork and interior, there is not one door ding and no gum in the carpet whatsoever.  Well, according to the valuation chart, this must be one hum-dinger.  

Obviously, it’s not.

Conversely, if there is a ’93 car that was sealed in a tomb from the time it was purchased, it will likely have an abnormally high value today.  Of course, that car is clean, but it is not typical or average clean.  A seller needs to be able to recognize that type of vehicle in relation to what the guidebook states.

Also, the type of vehicle makes a difference.  A pick-up truck may have a few places in the bed where the Christmas tree scraped, or a bowling ball bonked into the inner fender.  That’s not damage that one would like to see on the trunk lid of a car, but probably won’t balk at as much in the truck.  A commercial truck could even have more evidence of use, and it still may not affect the value much.

Clearly, most of these questions can be answered by knowing something about cars.  People that are in the automobile industry are usually there because they have some kind of interest and knowledge about them.  Body shops are good these days, but the savvy purchaser should still be able to pick out the train wreck car in most cases.  Having experience and familiarity with a variety of makes, models, and years, gives most people a good idea how much road rash is OK on a ten-year-old car, and how much is OK on a later model.

Think about it.  The customer has a zone they’re searching to find their car.  So if they have been looking at a number of cars in their zone, their research is probably giving them a good idea what to look for.  If they have narrowed their search to ’96 – ’99 Cavaliers, they have likely looked at several of them.  They have a feel for what’s OK and what’s not.  They have developed a barometer for what they think is “acceptable damage.”  And they got it by looking at a number of cars, being around them, and studying them.  It’s the same was an automotive professional should learn their craft, just on a wider scale.  It only helps the seller if they know more than the buyer.

So if this is all based on experience and subjectivity, why use a guidebook?  Actually, there are many reasons.  

An automobile valuation guidebook is just what it says—a guidebook for automobile valuations.  It sounds simple, and as far as the user is concerned, it is.  The market is researched, a large sample of each and every vehicle is evaluated, and an average price is determined.  Usually, there is an average retail price, a finance value, and a wholesale value.  And generally, those values are really close or dead-on to what a vehicle will actually bring.

This saves the seller quite a bit of trouble.  They don’t have to search this information out.  They don’t have to waste their time finding a big enough sample of clean cars to generate a number.  They don’t have to wonder if they’re right or not.  They don’t have to identify their particular model and figure out if they found the right one or not.  All of that is clearly listed in black and white.  They have an unbiased source that they can rely on—even show to the customer if they need a bargaining tool.

Furthermore, the people that assign values to vehicles in a valuation guide are aware that a ’93 might not be in as perfect condition as a ’08.  They take that difference into account.  The average condition on a ’93 reflects the price that a ’93 is listed for.  A good guidebook thinks of everything.

From that guideline, a seller has a great starting point to determine the value of their particular vehicle.  Whether the vehicle is worth the same, more, or less than the book states is up to the seller (and ultimately, the buyer).  That’s when knowledge, expertise, and experience will make the difference.