MOTORVEHICLEVALUATION
BY
ENGR. BATTAH YAGA NDIRPAYA
MNSE, ASval, ASCostE, AEEcons.
BEINGAPAPERPRESENEDATINSTITUTEOF
APPRAISERSANDCOSTENGINEERS2011
NATIONALCONFERENCE
SEPTEMBER2011,ABUJA.
INTRODUCTION.
Youcannottalkoftransportationofpersons,goods
andserviceswithouttalkingaboutmotorvehicles.
Motorvehiclestransportsover60%ofpersons,
goodsandservicesinNigeria.
Motorvehicleisoneoftheassetsthatabound
everywhereintheworld,secondonlytorealestates.
Thereforevaluationofmotorvehicleissoimportant
thatavaluer shouldknow,becausethereishardly
anyvaluationassignmentthatmotorvehicleisnot
involved.
Itisthereforeexpedientforavaluer toknowthe
principlesofmotorvehiclevaluation.
Inthispaper,wearegoingtodiscuss:
Whatismotorvehiclevaluation;
Thepurposesforwhichmotorvehiclevaluationcan
becarriedout;
Thefactorsaffectingthevalueofmotorvehicles;
Theprinciplesofmotorvehiclevaluation;and
Themodernwaysofcomputeraidedmotorvehicle
valuation.
A.WHATISMOTORVEHICLEVALUATION?
Motorvehiclevaluationcanbedefinedas:
Theprocessofestimatingtheworthofamotorvehicle.
Theactofestimatingorsettingthevalueofmotor
vehicle.
Engineeringvaluation/appraisalofmotorvehicleisanart
ofestimatingthevalueofmotorvehiclewhere
professionalengineeringknowledgeandjudgmentsare
used.
B.PURPOSESOFMOTORVEHICLEVALUEATION
Valuationofmotorvehiclecanbedoneforthe
followingpurposes:
Sales/buyingofsecondhandvehicles
Tradeintransactions
Taxation
Insurance
Salesandleasebacktransactions
Merger/Acquisition
C.FACTORSAFFECTINGTHEVALUEOFMOTOR
VEHICLES
Thefactors/conditionsthatcanaffectthevalue
ofmotorvehiclesare:
Age/lengthofusage
Mileage/extentofusage
Conditionofengine/transmissiontrain
Bodycondition
Tirecondition
MaintenanceHistory
Functionalityofaccessories
I.AGE/USEFULLIFEOFAVEHICLE
Theusefullifeofavehicledependsonmany
factors.Itdiffersfromcountrytocountry
andtheuseofthevehicle.
Theaveragevehiclelifeforacommercial
vehicleintheUSis15years,thatofsales
manis10yearsandthatforprivateuseis20
years.
Thetablebelowshowstheaverageusefullifeofvehiclesindifferentcountries.
COUNTRYUSEFULLIGE
Unitedstate1015years
Europe14years
EuropeUnion1215years
France13years
Austria1215years
UK13.95years
Netherlands7.2years
Germany910years
India20years
China10years
Canada225,000km
Australia15years
Colombia1215years
Moroko 17years
Phillippines 1015years
NotethatthereisnoneforNigeria,itisourdutyasprofessionalsinthisfieldto
agreeonafigurebasedonourcircumstancesandstandardizeitwithStandard
organizationofNigeria.
.
9Ageofavehiclehasbeenestablishedtohavegreatinfluenceonthevalue
ofmotorvehicle.
9Thevalueofavehicledropsrapidlyduringthefirst10years.
9 Attheendof10years,thevehicleisworthonly20%ofitsoriginalvalue
andattheendof20yearsitisworthonly10%ofthisoriginalvalue.
II.MILEAGE/EXTENTOFUSAGE
Mostvehiclescanbedrivenabout250,000kmbefore
majorrepairshavetobemade.
Asavehicleisdriven,mechanicalpartsofthecar
slowlywearout.
Themostexpensivemechanicalpartsofavehicleare
theengineandthetransmissiontrain.Thecombine
averagelifeofthesecomponentsis250,000km.
Mileagealsodepreciatesthevehiclesmonetaryvalue,
thusmakingitsresalevaluedecreasewithevery
kilometeryoudrive.
.
Vehicle depreciates a small amount during the first 10,000 Miles
and then drops rapidly during the next 50,000 Miles to about 75%
value of original cost. This is because the rate at which car
depreciates is not same from year to year.
It has been established that mileage never takes the value of a
vehicle below 50% of its original value.
III.ENGINEANDTRANSMISSIONCONDITION
Asearliersaidengineandtransmissiontrain
aremajorfactorsindeterminingthevalueof
avehicle.
Theengineconditioncanbe:
crackedorbrokenengineblock,knocked,
resurfacedcrankshaftto02or04,smoking
exhaust,leakingengineoil,malfunctionof
gearbox,malfunctionofbrakesystems,etc
IV.BODYCONDITION
Thebodyconditionofavehiclehavegreat
effectonthemonetaryvalueofthevehicle.
Thebodyconditioncouldbe:
fadedpaint,bodyhavingscratches,
accidented bodyattheboot,bodyorbonnet,
rustedbody,rooforflooretc.
V.STATEOFTIRES
Tires,eventhoughtheycaneasilybe
changed,itsstateatthetimeofvaluationwill
beafactorandcanalsotellastory.
Tiresareusuallyclassifiedeitherasnew,fair
orwarnout.
VIMAINTENANCEHISTORY
Ifavehicleismaintainedaccordingtothe
manufacturersspecification,itwillprolong
itslifeandenhanceitsvalue,ifnotitwill
shortenitsusefullife.
VII.FUNCTIONALITIESOFACCESSORIES
Thefunctionalitiesoftheaccessoriesina
vehicleisanindicationofitsageandan
indicationofhowwellitismaintainedtoo.
Thevalueofvehicleisenhancedifthe
accessoriesarefunctioningwell.
D.COMPUTATIONOFVALUATIONFACTOR
USINGWEIGHTMETHOD
Theprinciplesworkonsevenweightedheadingswith
totalweightof50units.
Eachheadingisgradedinto1to10.Thebestsituationis
graded10units,whiletheworstsituationisgraded1unit.
Theproductoftheweighandthegradeobtainedisthen
summedupanddividedby500beingtheproductofthe
weighandthebestgradeforeachheading.
Theresultoftheaboveisthevaluationfactorwhichisa
fractionofaunit.
Theproductofthevaluationfactorandcurrentmarket
pricegivethevalueofthemotorvehicle.
E.TABLEOFWEIGHT
S/NDESCRIPTIONWEIGHT
1Conditionofengineandtransmissiontrain25
2Age/lengthofusage7
3Mileage/Extentofuse5
4Theconditionofthebody5
5Functionalityoffacilitiesinthevehicle5
6Maintenancehistory2
7Conditionoftires1
Total50
F.GRADINGOFVEHICLECOMPONENTS.
I.CONDITIONOFENGINE
1Crackedorbrokeengineblock2.5
2Knockedengine2.0
3Resurfacedcrankshaftto02or041.5
4Smokingexhausts0.5
5Leakingengineoil0.5
6Malfunctionofgearbox2.0
7Malfunctionbrakesystems1.0
II.AGE/LENGTHOFUSAGE
Theaverageusefullifeofacommercialvehicleis
15years.Itisgradedthus;
1yearhas10unitswhile15yearshave1unit.
Dependingonthenumberofyearsofusage,the
unitscanbecalculated.
III.MILEAGE/EXTENTOFUSEAGE
Themaximummileageexpectedofavehicle
is250,000km.
Itisgradedinsuchawaythat250,000kmis1
unitand1kmis10units.
Ifthecurrentmileageisobtained,the
remainingmileagewillbecalculatedandthe
unitsobtained.
IV.CONDITIONOFTHEBODY
Fadedpaint1.0
Scratchedbody1.5
Accidented bodyatboot,bodyorbonnet4.5
Rustedbody,rooforfloor3.0
V.STATEOFTIRES
Whenthetireisnew,itisgraded10units,but
whenitiscompletelywarnoutitisgraded1unit.
Thetiresaregradedeithernew,fairorworn out.
Dependingonthephysicalassessment,the
applicableunitswillbedetermined.
VI.MAINTENANCE
Ifthemaintenancemanualisbeingobserved
religiously,itwillbegraded10units.
Whenthevehicleisnotbeingmaintainedatall,
itisgraded1unit.
Dependingonthemaintenancerecordand
history,theappropriateunitswillbe
determined.
VII.FUNCTIONALITYOFFACILITIES
Ifallthefacilitiesinthecararefunctioning
perfectly,itisgraded10units.
Ifallthefacilitiesarenotfunctioning,itis
graded1unit.
Dependingonthestateofthefacilitiesinthe
vehicle,theappropriateunitswillbe
determined.
G.EXAMPLEOFVALUATION
I. LetusvalueaToyotaCorolla1.8GLvehicleof2006modelandhaveamileageof
75,000km,assumingthecurrentmarketpriceisN3,500,000:00
VALUATIONFACTORTABLE
S/NDESCRIPTIONWEIGHT(W)GRADE(G)WXG
1Ageofvehicle7.06.545.5
2Mileageofvehicle5.07.035.0
3Engine/transmissiontraincond.25.07.0175.0
4Bodycondition5.07.537.5
5Facilitiesconditions5.07.035.0
6Maintenancehistory2.07.014.0
7Tirecondition1.06.06.0
50.0 348.0
VALUATIONFACTOR;Vf =WxG =348 =0.696
500500
VALUE=Vf xCurrentmarketprice
Value=0.696x3,500,000.00=#2,436,000.00
II.Assumingthiscarhadfatalheadoncollision.Whatwillbethevalue?
Thevaluationfactortablewillbeasfollows:
S/N.DESCRIPTIONWeight(W)Grade(G)WxG
1Ageofvehicle7.06.545.5
2Mileageofvehicle5.07.035.0
3Engine&transmissioncond.25.01.025.0
4Bodycondition5.01.05.0
5Facilitiesconditions5.01.05.0
6Maintenancehistory2.010.020.0
7Tirecondition1.01.01.0
Total50.0136.5
ValuationFactor
Vf =WxG =136.5 =0.273
500500
Currentmarketprice=#3.5million
Value=Vf xCurrentMarketPrice
Value=0.273x#3,500,000=#955,500.00
III.LOWESTVALUEOFMOTORVEHICLE
Thevalueofavehicleinitsworstcondition
aftertheusefullifeis10%oftheinitialvalue
orthecurrentmarketvalueofthatcarwhich
everisgreater.
Vf=50/500=0.1=10%
G.MODERNWAYSOFCOMPUTERAIDED
VEHICLEVALUATION
Therearemoderncomputeraidedmotorvehicle
valuationinpracticewhichareveryusefulbut
withsomelimitationbecausetheymostlyused
usefullifeand/ormileageastheonlyfactorsto
determinethevaluationfactor,whichisnot
practicallycorrect.
Thefollowingareexamplesofthecomputer
aidedmotorvehiclevaluations:
I.Whatsyourcarworth?
WhatsyourcarworthisbeinghostedbyDrive.
Theinformationtobeprovidedis;
VehicleMake;
VehicleModel;
YearofManufacture;
Typeofbody;
Theseries.
II.TheGLASSSGUIDE
TheglasssguideisbeinghostedbyGlass.
Theinformationtobeprovidedis;
VehicleMake;
VehicleModel;
YearofManufacture;
RegistrationNumber
Mileage.
III.MOTORVALUATIONCALCULATOR
TheMotorValuationCalculatorisbeinghosted
byEIMSemotorcentre.
Theinformationtobeprovidedis;
VehicleMake;
VehicleModel;
YearofManufacture;
Region;
EngineCapacityinCC.
IV.FREECARVALUATIONONLINE
TheFreeCarValuationonlineisbeinghostedby
Carpoint
Theinformationtobeprovidedis;
VehicleMake;
VehicleModel;
YearofManufacture;
RegistrationNumber
Mileage.
V.FREEUSEDCARVALUATIONS
TheFreeUsedCarValuationsisbeinghosted
byWhatCar?
Theinformationtobeprovidedis;
VehicleMake;
VehicleModel;
VehicleVersion;
YearofManufacture;
Mileage.
CONCLUSION.
WehavedefinedEngineeringValuationofvehicles.
Theimportanceofmotorvehiclevaluationcannotbe
overemphasizedwhenitcomestosalesand/or
buyingofsecondhandvehicles,taxation,Insurance,
merger/acquisitionofbusinessenterprises,etc.
ItishightimeInstituteofappraisersandcost
EngineersandindeedallEngineeringValuers start
promotingmotorvehiclevaluationbecauseofits
hugepotentials.
Whoknows,itcouldbeourgoldmine.
.
