A Guide to More Accurate Vehicle Appraisals

Case Study #1

A Simple Example

Let's take a look at an example appraisal process to help clarify what we mean by some of the above points. The following data was generated by Carbly for a 2016 Honda Civic.

Our appraisal summary shows that we should expect to pay around $11,520 at wholesale, and could reasonably anticipate a retail selling price of $14,640. This is a good profit margin, and so far, all signs point to this being a good vehicle to purchase at the right price.

We also see the vehicle highlights section which points out both postives and negatives to be aware of. This car has a clean CARFAX, a great possible profit number and a low market days supply (days on lot).

A slightly more detailed summary of the CARFAX shows that it's not only clear of accidents and damage but has also only had 2 owners, which is good for resale.

A full report can be opened by clicking the link at the bottom.

It's time to look at some of the details supporting these numbers, and we start with Black Book^®. The prices show that a vehicle in average condition maps closely to what we've seen thus far.

Kelley Blue Book^® also tracks quite closely to what the appraisal summary shows. On the wholesale side, Kelley Blue Book^® indicates that we can expect to pay $11,562 while in the lanes at auction.

Retail pricing is also very similar to what we have seen so far. The Typical Listing Price on Kelley Blue Book^® is $14,813 and the Fair Purchase Price is $14,408.

The lending value is encouraging too, showing that most lenders will finance more than the average sale price.

Now let's crosscheck our values with what J.D. Power (formerly NADA) reports in Carbly to see if values are still consistent.

J.D. Power shows an auction value of $11,209 which is a little lower that what we have seen so far but is still within the range.

Again, retail is very similar with at $14,450 for a car with similar mileage.

If your lender happens to use J.D. Power for their underwriting rather than Kelley Blue Book^®, you won't be able to finance as much. Their loan value of $11,175 is indeed lower but at 120% LTV it doesn't leave a potential buyer with too much of a necessary downpayment so things are still looking promisng for our Civic.

Let's move on to Manheim Market Report to see if the auction report differs from what we have seen in the guidebooks.

Again, both wholesale and retail numbers are very close to what we have seen up until now. So far, we have very good data consistency between the auction report and guidebooks.

The bottom section shows price history and projections for the wholesale and retail car markets. The projected price drop for both is pretty low, which gives us confidence that even if we don't sell the Civic in a short amount of time, it's going to hold its value well.

It's always important to properly understand your local market place when you're appraising. Live Local Market, shows us some incredibly powerful data with comprehensive live retail coverage.

The suggested retail price for our Civic is in keeping with all of the values we have seen so far and the mileage on our car is slightly lower than the average; things are still looking positive.

Note the distribution graph for retail asking prices. We can see that the bulk of dealers are also pricing within the range of values that we have seen.

The trim table below shows that there are a fair few similar vehicles within 200 miles but the median days on lot of 28 indicates that demand is strong enough to support supply.

A detailed examination of the individual local retail comps make this Civic even more appealing.

Most of the closest competitor vehicles either have higher miles of a bad vehicle history which makes our lower mile and clean history example that much more saleable.

Real Retail, shows us some incredibly powerful data by listing actual retail sale prices. These are not asking prices, but final sale numbers as reported by dealerships.

This is fantastic data that gives accurate context to the Live Local Market; after all, we all know that we rarely close a deal at asking price.

The retail sale prices are again consistent and encouraging.

Note the distribution graph for market days supply. Carbly shows you the median number, not the average. An average MDS would be heavily biased by that outliier of 1,235 days which might lead to seeing a misleading number.

Next is a look at actual recent retail sale comps from Real Retail. For vehicles with a similar mileage of 33,000 miles, we see that dealers are reporting good profit margins for this Honda.

Case Study #2

A More Ambiguous Example

Now let's consider a more complicated appraisal, a 2013 Porsche Boxster.

At first glance, seeing the spread between the wholesale and retail price might have some dealers licking their chops. But let's look a little closer at the data, and we'll see where the true power of Carbly comes into play.

While the CARFAX report shows clean, and a large possible spread is flagged, we need to be aware of a few things:

• This car has significantly lower mileage than other examples.
• With a median turn of 26 days, this Boxster should sell relatively quickly but Porsche customers are known for being very particular about the spec of their car so a quick turn cannot be guaranteed.
• As we mentioned, the spread between wholesale and retail looks great but if you look more closely you will notice that the ranges for both values are broad and also overlap. This certainly requires further evaluation.

One of the first steps we take when we're suspicious about a valuation is to compare the data providers. We can see immediately that something is amiss.

• Black Book^® has a value of $26,300 for wholesale and $30,300 for retail.
• J.D. Power shows $26,639 for wholesale and a significantly higher retail value of $35,550.

Although both books provide very similar wholesale numbers they are $5,000 apart on retail. Making a $5,000 error could seriously jeopardize a dealer's business.

At this point we still don't know which of the books is correct. This is highly concerning, and means that we have to be very cautious.

When you encounter inconsistencies in data, it's always wise to consult more books to see if they align with either of the two that we have already looked at.

Kelley Blue Book^® has a wholesale price of $30,983 and a retail price of $34,340.

• The Kelley Blue Book^® wholesale value is higher than the retail value in Black Book^® which only causes more confusion.
• Their retail number of $34,340 is similar to the retail value we saw in J.D. Power.

Maybe we are getting closer to establishing an accurate value.

Let's see what Manheim Market Report says about our Boxster.

• MMR shows $34,400 at wholesale and $40,700 at retail.

There is almost no overlap between Manheim Market Report and the other the valuation books we have looked at so far! You can see here where relying on a single provider for data can be dangerous.

In situations like this, turning to retail market data can provide the context we need.

Let's look at the live retail market first in Live Local Market.

• It shows us higher average market days supply than we saw earlier with 39 days.
• A closer look at some of the individual comps below show some alarmingly high days on market too, so it's imperative that we price this car correctly to optimize turn.
• The average retail asking price of $33,023 and a mielage specific suggest asking price of $37,240 are closer to the values shown in Kelley Blue Book^® and J.D. Power so we are starting to see a pattern.

The wide distribution of retail prices still make it hard to get close to an accurate number for our Boxster though.

Let's finish our appraisal by seeing what Real Retail can tell us using historical retail transactions from other dealers.

• Real Retail shows us the lower market days supply we saw earlier.
• Average price is shown as $33,826 based on an average mileage of 32,905.
• The mileage adjusted retail price suggests that our Boxster could fetch $40,242 because of its low miles.
• Closer inspection of individual comps though reveals that most cars with the same miles have all sold in the $35,000s.

Note the $748 loss. This could very well be the result of someone relying on a single data source for their initial appraisal, resulting in far too high of a ceiling value at purchase time.