How classic cars get appraised
Classic car appraisals occupy a fair amount of my time, and there are always a lot of questions about the appraisal process itself. I thought this would be a good time to take some of the mystery out of it.
In most cases the party ordering an appraisal ends our conversation with something along the lines of “I’d like the appraisal to come in as high as possible,” or “I’d like the appraisal to come in as low as possible.”
A party going through a bankruptcy or a divorce might want the appraisal to be low in the hopes of being able to keep the car. A party trying to obtain financing for the purchase of a classic car, or donating a car to a charity, or negotiating with an insurance company after a loss would want the appraised value to be as high as possible.
As an appraiser, it is my job to assign a specific value to a particular vehicle, but unless we actually sell the car that is the subject of the appraisal, the value assigned by the appraiser is nothing more than a well-educated guess. That is why appraising a collector car is more of an art than a science.
Some appraisers will simply pull out a letterhead and jot down a note to the effect that in their professional opinion your 1957 Chevrolet Bel Air convertible is worth $75,000. In many cases this will suffice. And in many it won’t. Especially if the appraisal is challenged for any reason by an I.R.S agent, insurance underwriter, bankruptcy trustee, or your soon to be ex-spouse’s attorney. My appraisals are written to particularly high standards known as USPAP (Uniform Standards of Professional Appraisal Practice). They are prepared in fundamentally the same way that a real estate appraiser would appraise your home. Your home is considered “real property” and your classic car is considered “personal property.”
When I appraise a classic car I use a combination of three things. The first is “Recently recorded public sales” of similar vehicles, also known as “comps.” The second is published figures in price guides such as NADA. The third is my knowledge of the market.
The values of “comps” can vary dramatically. A very nice 1957 Bel Air Convertible might trade hands locally for $70,000. Recent completed sales on eBay (forget “asking prices”) are in the $55,000 range, and the same car at the Barrett-Jackson auction in Scottsdale, Arizona could easily fetch over $100,000. Published figures such as The NADA Price Guide put it somewhere in the middle at about $69,850. So, what is this car worth? Good question. And one that can’t be answered without first explaining that almost all classic cars that I appraise are done so at Fair Market Value (FMV). Rarely do Salvage Value, Replacement Value, Liquidation Value, Marketable Cash Value, or numerous other values come into play. Occasionally Diminished Value is necessary if a classic car has been damaged, but that does not apply here.
FMV, as applied to classic cars, is loosely defined as “ The price that the vehicle would sell for on the open market between a willing buyer and a willing seller, with neither party being required to act, and both parties having reasonable knowledge of the relevant facts.” The part of the definition that says “with neither party being required to act” pretty much eliminates the high Barrett-Jackson sales figures as the sole “comps” because both parties usually have about 180 seconds to act. Likewise, the low eBay figures cannot be relied on as the only “comps” because of the part of the definition that reads “and both parties having reasonable knowledge of the relevant facts.” eBay buyers generally rely only on the information provided by the seller, and that is why classic cars sold on eBay generally sell at a discount. Interestingly, the published NADA figures are just about right. That’s because their figures are derived predominantly from reports of actual sales that are provided to them from a variety of sources on a quarterly basis.
It is my job to take all of these values and determine exactly how I want to apply them to the car being appraised. I also make seasonal and geographical adjustments to the previously mentioned data, and I will often modify a value based on criteria that is hard to quantify, such as originality, provenance, or thorough documentation of a vehicle.
Hopefully you now have a better understanding of how a car is valued. Your car is not worth what you see on television at the Barrett-Jackson auction. Not unless you want to pay to transport it to Arizona, pay a consignment fee, pay a commission if it sells, pay for someone to travel with the car, and pay to bring it home if it doesn’t sell. Nor is it worth the “asking prices” of sellers all over the media and internet. It is worth what someone is willing to pay for it, and that is usually what similar cars have sold for on the open market.