Recently, I had a case where an adjuster was negotiating an inherent lost market value claim based on values and condition descriptions found in Kelley Blue Book. The amount of inherent lost value that the adjuster was willing to pay was about $4k less than what my research and opinion came out to. Obviously, I argued that Kelley was not accurate, and naturally, the adjuster requested a synopsis on why I believed that using Kelley Blue Book was not a reliable method for researching inherent lost market value, or DV as it is becoming common to call it (diminished value).
I happily obliged the adjuster, and here in this blog entry, I will re-cap why I think using Kelley Blue Book (or any other online valuation guide) to calculate DV is a severely lacking and inaccurate method.
1. No disclosed methodology. Kelley (and Edmunds and NADA) declares that they base their values on market data they gather, but they do not disclose how they gather their data, so there can be no comparison between how they evaluate “stigma” losses and how an independent appraiser (like myself) does it.
2. The class of vehicle seems to be omitted as a factor as evidenced by the largely flat percentage that is used in Kelley (14%) to account for prior frame damage. An old pickup and a luxury sport coupe show to lose the same percentage of value due to prior frame damages.
3. Kelley only has 4 condition levels for vehicles and in the real market, no two vehicles are ever in the exact same condition. Kelley does not have the capability of actually seeing a vehicle in person to evaluate it’s condition.
4. Kelley lumps all major repairs into the “fair” condition bracket regardless of severity or complexity. They generalize by saying “minor prior paint and body work” or “major prior paint and body work” or “prior frame repair or alteration”. These descriptions cannot fully describe the extent of damages vehicles sustain in collisions.
Now, I have to say that the only way I was able to figure out some of these percentages was to go into Kelley and reverse engineer some valuations. You can see for yourself how Kelley is very hit or miss on devaluing vehicles properly due to prior repairs. At least we can say the Kelley Blue Book supports the idea of lost market value due to repair stigma, and that’s a step in the right direction. I don’t think an online guide will ever replace a flesh and blood appraiser in thoroughness and accuracy, though.