Seattle Antique and Classic Car Appraisal - Why does your restored classic appraise for less than book value?

Why does your restored classic appraise for less than book value?

This gets asked a lot, and there are some simple reasons along with some complicated ones. It has to do with historical sales data. That's the simple answer. Most value guides are based on reported sales and auction sales. It is an average of these reported sales.

For example, if you have a 1973 Pinto and there were two sales of #1 cars with one at $10,000 and one at $100,000, the average sale would be $55,000. Unfortunately, your precious Pinto probably isn't worth $55,000 but that's what the book value is going to show you. That's why they call it a "Guide".

Value guides give you a range for the average value, and rarely include private sales other than those provided by DMV. They don't consider the fact that in many reported private sales the buyer gives the seller a little more to put a lower sale price to reduce the sales tax and fees. This is quite common and skews the values.

Keep that in mind when you buy, because what you just did was lower the value of a car that you just bought. Save a penny.... So, there's a simple answer. A more complicated reason is when you assess the value by adding in the condition, even more so when you start inspecting the car. That brings up a flurry of questions and people have a tough time understanding the answers. One of the most common issues is understanding why` the car isn't worth the purchase price plus every red cent that you spent on it since you bought it.

It's maddening to the appraiser to try to explain this because when someone says 'Hey, I just spent $800 on a Carburetor, and you only added $350 to the value. Why wasn't it more, and there's my labor too.'

Well, here's the thing; First off, it came with one and won't run without it. Not a lot of choices there. Secondly, yes it WAS worth $800. That is, until you took it out of the box and installed it. Now it's NEWER, not NEW and maybe Joe car buyer had a SUPER NEW one and he was hoping that the one on the car needed work so he could negtoitate some and his wife wouldn't take away his birthday because he spent $1600 on his carburetor. So, he really wouldn't want to pay extra. Everyone has their reasons.

If you ever want to see something lose its value in 10 seconds, buy and sell auto parts. If you ever want to see something gain value in 10 seconds, buy auto parts new or used, put them on a shelf for 30 or 40 years, put them on the internet for sale and watch your e-mail. That is the way it works. When you get into valuable collector items, it gets more complicated and down to splitting hairs. Thank the forums for that. It's ok in some instances, but much of the time it's counter-productive and only confuses people more. That's where experts are needed to set the record straight.

There was a group on a Mercedes 190sl forum that went on aboutr the correct thread color on the fuel lines. It was a heated multi-week discussion with ton of owners weighing in. It was surprising it didn't make the news.

It eventually boiled down to the manufacturer choice. Blue happened to be for brake lines and red for fuel. There is no uniform color coating for antique cloth style hose. Nowadays, there is a DIN number with the rating and description on the entire length of the hose. Needless to say, this went on for days. No answer was good enough, and no one could let it go.

Really, the only people that are most likely to know are the technicians who worked on them in the day, and the workers at the factory in 1955. Does it really matter? Well, on a 10 million dollar Ferrari, yes it probably does. On a 1979 BMW, probably not, but now it's in question.

What happens is that people spend a lot of money trying to be factory correct and then get upset when it doesn't up the value for the full amount spent. On lower value cars, to be honest, it's playing horseshoes and hand grenades and close does in fact count. The first thing an appraiser does with new parts is figure out what they're NOT worth. A good rule of thumb that gets the value close is retail and labor, deduct 30 to 40% and you've got your number. Not in all cases, but in many.

Another point is that many manufacturers use different suppliers for the same exact part, so it may be that the same car could have two different manufacturers for the same part, and both are correct.

British cars on the other hand are different. Parts are bought by the date of manufacture on many models because their system was to buy from the same manufacturer and make it fit the car. So, a sprite may have the same alternator pulley as Jaguar. It just depends on the day you bought it.

Italian cars kind of the same thing. You will find the same door handles, lights, gauges etc. on Ferrari as you find on Fiat and Alfa. This is learned mostly from experience. Appraisers will know the difference. Porsche and VW are different. VW parts may fit Porsche, but the Porsche part is much higher quality.

Ford Chevrolet and Chrysler? We shouldn't go there, but briefly. Intake manifolds with different casting numbers may be quite different, that's possible. Exhaust manifolds, not so much. Identical bell housings with the casting number facing inward against the transmission? Yeah, well don't expect that one to get checked. It's of relative importance, it's not a deal breaker. Hunt one down later if it's keeping you awake at night. Enough said.

Why devalue parts and labor aside from parts no longer being new? There are a couple of reasons here also. One is the markup on parts. You don't even want to know how much it is. Suffice to say, 40% isn't even close. That would be so called wholesale.

When you buy in quantity from a manufacturer it is much less. Getting rid of some of the markup brings the value into a more realistic range. The same goes for labor, it is ridiculously marked up. Making these value corrections correlates very closely to actual fair market value if it is done correctly.

Actual cash value is a different story and is used to calculate replacement cost, typically for insurance. It is rare for any car to sell for ACV, unless it's a very special car, and there are quite a few out there. These cars can suffer the same fate when the market goes down as it did during COVID. Many Ferrari's, Mercedes and the like lost nearly 50% of their value and still haven't recovered. Muscle cars and hot rods have also taken big hits.

Something to remember is that collector cars are allowed as investments, so you can claim them on your taxes. If you are an investor. So, when the stock market is up, buy cars, and when it is down, sell. They are inversely related. Many of the high dollar auction cars are bought on long term loans and sold long before the loan matures. The buyer is simply paying interest for a while and collecting off the dividend of the sale.This greatly affects your value because it goes on so frequently. It makes the car much more affordable for the seller.

Some are leases or specialty loans, and the seller just had the car for a few years making nothing. These have a hard reserve at auction, and you will see the same car every few years. Many of these are corporate owned or bank owned.

We're not talking about loans though. We're talking about what affects your value. As long as they aren't losing money, they're fine with it, but when they decide to dump it for a cash grab, lookout because if they have made enough money they can get rid of it fast and cheap. That's going to drop the value of your car in a hurry which shows up as a sudden drop in the overall market affecting future values. You may have been fine on your investment, or you just got the rug pulled out from under you.

So, you can wait, sell it at a loss, or you can wait. If it's even somewhat rare, it could be several years for a sale or multiple sales to bring the average up. That should provide some clarity to understanding what affects the book value on your car. Remember, the book value is all averages.

You should always have a solid appraisal that is current when you put your car up for sale. Beware of online appraisals for cars less than about 15 years old, there are not going to be enough sales to assess a value without seeing the car. Independent mechanical inspections also will not fly. Look for the disclaimers that often say "Not valid for pre-purchases, financing, insurance or legal purposes. What are they good for? Do you still have a pet rock?

That's not the only damage an online appraisal can do. When an online appraisal slips through the cracks and the grade of the car is affected, it again causes complications that take time to correct.

There was a recent appraisal done online by an insurer halfway across the country that listed the vehicle at $38,000 appraised value which coincided with Hagerty for a #2 car. The car went for sale at auction and did not sell. The price was reduced, and a prospective buyer called for an independent appraisal from Seattle Antique and Classic Car Appraisal which included a complete mechanical inspection. It was appraised at $39,000 on visual inspection. The mechanical inspection revealed that there was nearly $13,000 worth of repairs to meet the standard of a #2 car.

The buyer received an itemized list, including costs, calculations, and pictures of every item with markup to identify each problem, making it uncontestable. Then the buyer went back to the negotiating table with a solid, reasonably backed offer. As always, get someone who knows.

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