Monday, June 13, 2011

Car Valuation

"What is the point of a valuation if it does not reflect the actual market value of the asset? I work with land and property; when we pay a valuer, we expect to get a fair reflection of the true market value of the property if it were to be sold on the open market. What do you mean this valuation is not the market value of my car? That is ridiculous! It is a scam! What is this value then? *pointing at valuation certificate* Who regulates this industry? What good is this piece of paper? It is worthless! It is toilet paper!"
This, almost verbatim, is what a client said to me when I told him that his AA Car Valuation was not really an accurate reflection of the market value of his car. I totally understood how he felt as it is exactly what I feel on the subject and I would struggle to state it better than he did.

Essentially, in Kenya, when you pay to have your car 'valued' (by the AA; Automobile Association of Kenya, Regent Valuers etc) what you get is a report that gives you a figure that is not in any way an indicator of the amount of money you would receive for your asset if it were to be disposed of on the open market.

Like my client, I find this ridiculous and scandalous. In my opinion, and I gather in many other people's opinions, a valuation is meaningless if it produces a value that is purely theoretical.

But this is not the only problem I have with our car valuations.

During a recent valuation, I asked whether factors like colour, OEM rims vs Aftermarket rims etc were factored in the valuation. I was told not really. I asked whether the full mechanical report included an assessment of whether the mileage indicated on the car's odometer seemed genuine.. "not really" the man responded "we take your word for it". As I have written in the past, faked mileage cars are the rule rather than the exception in Kenya.

I know that banks and insurance companies rely on valuations to decide on premiums payable and loan values. So I guess the whole industry is geared towards serving that function rather than to producing accurate reflections of market value of vehicles.

My advice to people who want to deduce the value of their car is: Do not bother with a valuation. It is a waste of time and money. You are better off doing a bit of amateur market research to see what the value of your car is.

10 comments:

  1. Very true...some valuers ate my 5k..for no work done. Its like paying 5k for printing the cert but not the value of the car...I wonder what their work is...coz for quality, we have KEBS, for tax we got KRA..and now I think for expensive photographers, we have the valuers....labda they're owned by parliamenterians....I understand them..

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  2. Hope you don't mind the shameless plug here for www.cheki.co.ke where we really try drive pricing data, then consolidate it in one place for people to get a sense of Kenyan car prices at www.cheki.co.ke/priceguide

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  3. @Kevin
    "Expensive photographers".. hahaha. Indeed. I know banks do not lend 100% of vehicle value as shown on valuation report so I assume they have factored inaccuracy in their calculations.

    What I am really curious to know is whether the pie-in-the-sky values are a net gain or loss for insurers. They get higher premiums but they also have to pay out more for claims.

    @Carey
    Plug away. That is a very interesting resource. There is a very big void when it comes to finding easily available pricing information. I hope Cheki will fill that void so I don't have angry clients shouting at me while waving their valuations anymore.

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  5. The best way to understand the value of a car is to establish what it is average worth on the market today, then subtract or add based on things like, condition, how well or poorly it was maintained, how may previous owners and any other variable that you personally are looking for.
    AutoBazaar.co.ke has a value guide which cover only the last 6 months to date based on data it collects over this period. Its the only website in Kenya that offers a current price guide. Mind you its not a car valuation but a guide.
    Great post!

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