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.
.