Vehicle Valuation Techniques Flashcards

Functional obsolescence in a vehicle is best illustrated by:

Answer: An outdated infotainment system lacking smartphone integration

Functional obsolescence is a loss in value from outdated design or features within the vehicle itself.

External (economic) obsolescence affecting a diesel pickup could result from:

Answer: New regional emissions regulations restricting older diesels

External obsolescence comes from forces outside the vehicle, such as laws or market conditions.

Physical deterioration that can be economically fixed, such as worn tires, is classified as:

Answer: Curable physical deterioration

Deterioration is curable when the cost to fix it is less than or equal to the value it adds.

A comparable has 30,000 more miles than the subject vehicle, and the market adjustment is $0.10 per mile. The adjustment to the comparable is:

Answer: +$3,000

The comparable is inferior in mileage, so its price is adjusted upward by 30,000 × $0.10 = $3,000.

When using comparables from a distant region with different market conditions, the appraiser should:

Answer: Apply a location/market adjustment and explain it

Regional price differences must be accounted for with supported location adjustments.

Fair market value is generally defined as the price at which a vehicle would change hands between:

Answer: A willing buyer and willing seller, neither compelled, both with reasonable knowledge

This classic definition is used by the IRS and courts for fair market value.

Which value is typically the LOWEST for the same used vehicle?

Answer: Wholesale/auction value

Wholesale auction value is the dealer-to-dealer price and normally sits below private-party and retail values.