Valuation Methodologies Flashcards

Which figure typically represents the lowest value level for a used vehicle in good condition?

Answer: Trade-in/wholesale value

Trade-in or wholesale value is lowest because the dealer must recondition and resell the vehicle at a profit.

Actual cash value (ACV) in most U.S. auto insurance claims is generally defined as what?

Answer: Replacement cost minus depreciation, often reflected by fair market value before loss

ACV generally equals replacement cost less depreciation, commonly measured as pre-loss market value.

Under USPAP, which standards specifically govern the development and reporting of personal property appraisals such as vehicles?

Answer: Standards 7 and 8

USPAP Standards 7 and 8 cover personal property appraisal development and reporting.

In the cost approach, which form of depreciation results from factors outside the vehicle, such as new emissions laws reducing demand?

Answer: External (economic) obsolescence

External obsolescence arises from outside forces like regulations or market conditions, not the vehicle itself.

A 1990s sedan with an outdated, inefficient carburetor design that lowers its appeal shows which type of depreciation?

Answer: Functional obsolescence

Functional obsolescence stems from design deficiencies or outdated features within the vehicle itself.

When selecting comparables for a market approach, which is generally the most important criterion?

Answer: Similarity in make, model, year, and condition

Comparables should closely match the subject's key characteristics to minimize adjustments.

Why are asking prices from online listings generally given less weight than completed sales in a market approach?

Answer: They reflect seller expectations, not consummated transactions

Asking prices show what sellers hope to get, while completed sales show what buyers actually paid.