| Methodology in Collector Car Appraisals So, how do
you put a value on a car that only five are know to survive? The best way is to find the
most recent sale of one of the other 4 survivors. This is where a truly knowledgeable
appraiser will have the edge. Often cars of such rarity are sold privately and a good
network of collectors who can share information becomes of irreplaceable value. If no
information is available about one of the other survivors then you have to use a
comparable car. For instance, when I was called to appraise a 1929 era sedan built by a
relatively obscure manufacturer of high quality cars. The particular car in question was
the only one built of this style by both the manufacturer and the coach company. The
manufacturer's total car production was at most a few hundred cars so the survivors of any
body style don't change hands often. It was not possible to use an exact like car for a
comparable so I had to extrapolate some information. I did this by asking myself some
questions. What car is similar to this one? Who is collecting these cars? What are other
cars by this manufacturer doing in today's market?
Allow me to explain the background of this appraisal. To protect the all involved, I'm
going to call the car in question a Gem. I was contacted by a bank to render a second
opinion on the car because the car was being pledged as collateral for a loan with that
banking institution. There were no direct comparable sales for this custom bodied sedan
since it is essentially a one of a kind, so I started by using the GEM speedster as a
baseline. The Gem speedster is very rare, even though there are more of them than this
sedan, but a speedster is a far more desirable body style than a sedan. In fact, to the
serious collector a Gem speedster is the most desirable product of the Gem Company. In
this case, I had two recent sales of Gem speedsters, one for $250,000 and one for
$300,000. This established the top price being paid for Gem's. Now I ask, what is a
comparable car from another manufacturer? In this case I chose Packard as the comparable
car. It was aimed at the same part of the market as the Gem and you could have easily had
one bodied by the same custom body company that built this Gem. The difference in this
case was that there is a strong following for Packard and very thin following for Gem. The
law of supply and demand would dictate that more buyers for the Packard would make prices
higher if it had the same body as the Gem. So with this information in hand, I found that
I could buy today the best Packard sedan of 1929 with factory body work for anywhere from
$55,000 to $75,000.
The last question I asked is, "who is collecting these cars?" I've already
touched on this issue previously. The following for a Packard is strong while few if any
people are actively collecting Gems and they really want the speedster body style. I
determined that the Gem with the custom body was not worth any more than a Packard in like
condition without a custom body. With this supposition in hand, I then had to refine my
number. I've established the value between $65,000 and $75,000 but this would not be
enough for the bank. Although I expressed this range as the likely value in my report I
finally pegged the value at $65,000 because I cannot identify many potential buyers for
this car no matter how rare it is.
I prepared a report and submitted it to the bank. This was followed by a nervous phone
call from the bank questioning my opinion. How confident was I? I assured them I was very
confident because I had taken the extra step to call upon an old friend and fellow
appraiser to get a second opinion of my second opinion. The other appraiser ball parked a
number within $5,000 of mine and he has many more years in this business then I have.
The bank then delivered the punch line. The previous appraisal, supplied by the owner
of the car, was for $400,000. After I picked myself off the floor I assured them that this
car wouldn't be worth that much if it was gold plated. I explained my methodology in
detail in the report but reiterated it over the phone and offered to back it up with the
outside opinion of my fellow appraiser. I often fear that I have missed some market
information but I knew that I hadn't missed that much. As far as I can figure, the
previous appraiser stopped when he asked the question about how rare the car is. He never
established how deep the market was for this make. Rarity is only an impact on value when
there is sufficient demand to drive up the price.
This is why methodology is so important to the collector car appraisal.
The report should also include an explanation of methodology. The measure for an
appraisal is the “price that a willing, able and educated buyer would be willing to
pay.” The other common measure of value is the cost to reproduce or replace the
vehicle with an identical vehicle. This is often the measure that gets fought over in
insurance appraisals and court related cases. As any knowledgeable collector will tell
you, the cost of restoration is sky high and often and usually does exceed the fair market
value of the vehicle. Insurance companies know this. The specialty insurance companies
will make allowances for the high cost of repair and restoration since they know that
replacing a collector car can be near impossible. |
