A round-about way to estimate ‘true’ value of a car

Saturday February 27 2016

Imported vehicles at a yard in Mombasa on June 25, 2015. The universal formula for calculating the value of a used car involves taking the vehicle’s new price — today — and depreciating it by the number of years the vehicle has been in use. PHOTO | KEVIN ODIT | NATION MEDIA GROUP 

By GAVIN BENNETT
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The universal formula for calculating the value of a used car involves taking the vehicle’s new price — today — and depreciating it by the number of years the vehicle has been in use.

The factor of depreciation is arrived at through many years of market precedent and experience.

The equation can be further refined by classing the vehicle’s condition as “excellent” or “average” or “poor” for its age.

But even with this formula, Kenya now runs into serious trouble. What, pray tell, is the new price?

New vehicles are now arriving by such multifarious (and nefarious) means, the price of two apparently identical new cars can vary enormously. 

And what is the age and condition of a used vehicle? Should a vehicle that has spent five years driving around London — it has never hit a bump but is possibly a rust bucket — be depreciated at the same rate as a vehicle that has spent five years driving

around Nairobi’s rust free moonscape?

And what age is a reconditioned vehicle?  The age of its original chassis number, or the age of its “different” engine and gearbox number? 

And what age is that, when, for a number of reasons, the vehicle’s documents are fiction?

We are already in a muddle, and haven’t even started to look at the relative strength, specification, spares and service availability of different models from different sources — factors which have a direct bearing on its real worth, but which have virtually no

influence on its theoretical valuation.

A skilled and experienced valuer can tell a lot about a vehicle by just glancing over it and taking it for a spin. 

He or she could astonish the average layman with conclusions as to where and how the vehicle has been driven and maintained (or neglected, or disguised) as successfully as Sherlock Holmes astonished Dr Watson.

EVEN IF THE VALUER IS THAT GOOD

But even if the valuer is that good, and that diligent, and neither the judgment nor the certificate of findings has been tampered with, what price should be put on the result?

To get a rough idea, you can look at small ads and used car dealers to see what price is being “asked for” on  vehicles of the same model and age.

You can get a formal “valuation” from the Automobile Association or from your vehicle’s agent.

You can now also check the dollar prices listed in the mitumba websites (and allow for freight, duty etc).

You can check the trade-in value and/or advertise a car privately and see what offers you get.

What you can be sure of is that none of these values will be the same;  and the differences won’t be slight.  

When I conducted this exercise to help resolve an insurance dispute, the values I got on one vehicle ranged from Sh600,000 to Sh1.3 million.  

That’s how bizarre and anarchic the Kenya market has become, because it runs several different systems that play to very different rules.

Bottom line, there’s ultimately only one true value: a vehicle is worth as much or as little as anyone will pay for it.