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.