Diminished Value from the Dealers Point of View
Often times when speaking with a client, they tell us that a specific dealership will not provide them with diminished value figures. We’ve been doing diminished value appraisals for over ten years and have developed a large database of used car managers that will work with us. We’ve met with every used car manager in the area and our techniques often manage to get dealers that wouldn’t normally cooperate to do so. The reason is that sales managers know that we get assessments from multiple dealerships and average the amounts. Since we do it this way, there is less liability for an individual dealership and they transfer the risk to the appraisal company. Used car managers want to focus their time on selling as many vehicles as possible and not spending time in court testifying.
If our appraisal is based on assessments from 3 to 5 dealerships, then the insurance defense attorney should subpoena us as opposed to the multiple used car managers that we acquired our data from. Additionally, since our appraisals focus on inherent diminished value which is how much the vehicle is perceived to decrease in value based on the vehicle history, it wastes less of the used car manager’s time going through a detailed appraisal of a vehicle that the customer has no intention of actually trading in.
Insurance adjusters often try to argue that dealers increase the depreciation assessment up higher than they would actually charge in the real world; however it is not in the dealers best interest to provide a higher than actual amount for diminished value because most know that the client may ask who will provide them the highest trade-in value for the vehicle. Consequently, many dealers may actually state an amount that is slightly lower than they would charge in the actual market in hopes of getting the trade-in.
Some adjusters balk at the high amount of diminished value that results from severely damaged vehicles and try to argue that a dealer would not actually depreciate a pre-owned vehicle as much as they state, but they have to understand that a dealer is in business to make a profit. Any reputable dealership will avoid selling a vehicle with a severe damage history on their lot. One reason is liability concerns. The other is that the consumer they attempt to sell the vehicle to will want such a large discount that the dealer can’t make a profit, so most dealerships have to sell a vehicle with a very poor vehicle history to an auctioneer. If they give the person trading the vehicle in too much on the trade, then they may experience a loss when they sell the vehicle to the auctioneer. This is why used car managers depreciate a vehicle with a severe damage history so much.
We’ve gained a lot of experience meeting with and learning from used car managers. Although a few are just too busy or uninterested in getting involved, most are very nice people and enjoy discussing the details of their activities. The vast majority are very happy to meet and speak with a diminished value appraiser because we assume a burden that they would prefer not to deal with.