CAA Total Loss and Diminished Value 5 — Questions and Answers
Question 1: What is the most reliable primary method for determining ACV of a total loss vehicle?
- Analysis of recent sales or listings of comparable vehicles in the local market (Correct answer)
- The repair estimate total
- The owner's stated value
- The original MSRP minus a fixed percentage per year
Correct answer: Analysis of recent sales or listings of comparable vehicles in the local market
Local comparable market data best reflects what a replacement vehicle actually costs.
Question 2: When few comparable vehicles exist locally, what is the generally accepted approach?
- Use the vehicle's original sticker price
- Use the salvage bid as the ACV
- Declare the vehicle has no determinable value
- Expand the geographic search radius and adjust for market differences (Correct answer)
Correct answer: Expand the geographic search radius and adjust for market differences
Widening the search area with appropriate adjustments preserves a market-based valuation.
Question 3: Which state uses a 60% total loss threshold, one of the lowest in the U.S.?
- Colorado
- Florida
- Oklahoma (Correct answer)
- Texas
Correct answer: Oklahoma
Oklahoma totals a vehicle when damage reaches 60% of its value.
Question 4: After paying a total loss, the insurer typically takes ownership of the vehicle and sells it through what channel?
- A manufacturer buyback program
- A salvage auction (Correct answer)
- A new-car dealership
- A private consignment lot
Correct answer: A salvage auction
Insurers recover salvage proceeds by selling totaled vehicles through salvage auctions.
Question 5: An appraiser estimating diminished value on a luxury vehicle with low miles and a repaired unibody would expect:
- No diminished value
- A negative diminished value
- A relatively high diminished value (Correct answer)
- Diminished value equal to the full repair cost
Correct answer: A relatively high diminished value
Low mileage, high value, and structural repairs all increase diminished value.
Question 6: Which statement about first-party diminished value claims is most accurate?
- First-party DV is mandated by federal law
- First-party DV is paid only under comprehensive coverage
- Every state requires insurers to pay first-party DV
- Most policies and states do not cover first-party DV, with Georgia being a notable exception (Correct answer)
Correct answer: Most policies and states do not cover first-party DV, with Georgia being a notable exception
Most jurisdictions limit DV recovery to third-party claims, while Georgia allows first-party DV under Mabry.
Question 7: Which is the strongest evidence an appraiser can use to quantify diminished value?
- The repair invoice total alone
- The vehicle's original window sticker
- Dealer trade-in quotes comparing the vehicle with and without the accident history (Correct answer)
- The owner's personal estimate
Correct answer: Dealer trade-in quotes comparing the vehicle with and without the accident history
Market-based dealer quotes directly measure the price impact of the accident history.
CAA Total Loss and Diminished Value 5
What is the most reliable primary method for determining ACV of a total loss vehicle?