Recently I was provided with a pretty big list of arguments that attempted to show why diminished market value on automobiles is not real, or at least why it is never very much. I am going to address each one, point by point so as to be very thorough. Mind you, these arguments were made by a professional who evaluates the market of stigma losses on automobiles.
If an auto repair is guaranteed and done to industry standards, then the safety, function and appearance of the vehicle were restored, therefore, there is no lost market value (aka diminished value).
Rebuttal: Whether the safety, function and appearance were restored is a matter of opinion. There is no way to prove there will not be problems with the repair in the future, and therefore there is indeed market value lost due to the PERCEPTION of the consuming public (who are not experts in auto repairs).
There is no exact science regarding how to value a vehicle.
Rebuttal: What? Here is the definition of the Scientific Method from dictionary.com: “A method of research in which a problem is identified, relevant data are gathered, a hypothesis is formulated from these data, and the hypothesis is empirically tested.” Ever heard of professional appraisers who use standards like The Uniform Standards of Professional Appraisal Practice? Ever heard of taking the average of comparable vehicles (data gathering, sales comparison approach)? Also, no matter how scientific, nothing is exact, but that does not mean it is not extremely accurate. Consistent and reproduce-able results is the mark of a scientific process. It is done by my office daily. I get paid to prove I am right.
The fact that some dealers and potential buyers consider the accident history of a vehicle doesn’t mean that all of them will.
Rebuttal: True. What does this have to do with the average loss of value that we can measure scientifically by gathering data? This argument doesn’t help prove anything about diminished value, it just states that some people may be willing to pay the same price for a damaged and repaired vehicle (which, by the way, I have never met anybody who would).
NADA, Kelley Blue Book, and Edmunds don’t consider repair history in valuations.
Rebuttal: FALSE. . . Kelley has specifically categorized previously repaired damages in their condition assessment guide. NADA and Edmunds don’t disclose in detail what factors they consider in the condition of a vehicle. Additionally, these guides are online guides that clearly disclaim that each case needs to be addressed on it’s own, and they even state that some vehicles may have factors that cannot be determined without a physical inspection of the vehicle’s condition. When a real appraisal is needed, a flesh and blood appraiser is required. See argument 2’s rebuttal.
Diminished value is speculative.
Rebuttal: So? The price of any vehicle is speculative, and whether you live tomorrow is speculative. Here is the definition of speculate, again from dictionary.com:
verb (used without object), spec·u·lat·ed, spec·u·lat·ing.
“to engage in thought or reflection; meditate (often followed by on, upon, or a clause).”
There is no evidence that vehicles with prior structural repairs perform differently than undamaged vehicles.
Rebuttal: I can’t produce any evidence, true, but neither can anyone provide evidence that vehicles with repaired structural components perform exactly as they did before. Besides, the performance is not the question, it is the perception attached to the damage history that affects the VALUE, not the performance.
Just because some buyers demand a discount does not mean all will, so DV is not a universal experience.
Rebuttal: See argument #3’s rebuttal. This is the same argument. It does not hold water AT ALL.
Dealer opinions about trade-in value is not of any value because dealers are known to buy low and sell high.
Rebuttal: What?! Dealer opinions about trade in value are not of any value? How about the fact that NADA and all the online guides indicate that dealers get the majority of their used vehicles on the trade-in market and that in every publication you can find, the largest market for used vehicle is . . . you got it. . . THE TRADE-IN MARKET. Now, I agree that dealers are known to buy low and sell high, that is why we perform market research and account for all the factors, like dealer profit, location, and many other things. This is also why our data on lost value is considered conservative. We do not calculate the retail loss in value (which is much higher). To be scientific, we must use data from the largest applicable market, the TRADE-IN market. The scientific surveying method we utilize is why we are able to empirically test our data through actual records of dealer purchases of trade-ins at discounted prices due to the stigma of defect that is attached to repair history. I have never met a dealer that did not ask the trade-in owner about damage history and who did not account for it by lowering their value assessment.
There is no way to find out the diminished value unless you sell the vehicle.
Rebuttal: FALSE! If this were true, then insurance companies could also argue that your totaled 2013 Mercedes is worth $5, and you could not prove otherwise unless you sold the vehicle. Clearly, an object does not have to be sold in order for it’s value to be determined. Even if it were sold, the same argument that was used in #8 above goes to contradict the final argument. If a dealer buys low, then that means all the vehicles they buy are of low value. . . . until the sell them for higher! The vehicle had the same value regardless of it’s selling price. The sales price is determined by how well the buyer and seller negotiate. The value as assessed by an appraiser is done based on procedures, averages, and a scientific method (if done properly). We all know that people get deals all the time, but that does not make what they purchased at a steal worth less.
Still think you can prove that my data is not right? Call my office and we’ll see if you have any better arguments than have been tried so far. We are always up for a challenge!