CAADE Total Loss and Valuation 4 — Questions and Answers
Question 1: When a salvage title is issued to a total loss vehicle that is subsequently repaired and re-titled, it typically receives a:
- Clean title if repairs pass a state inspection
- Rebuilt or reconstructed title indicating prior total loss history (Correct answer)
- Lemon law title reflecting defect history
- Bonded title pending further inspection periods
Correct answer: Rebuilt or reconstructed title indicating prior total loss history
Repaired salvage vehicles are re-titled as 'rebuilt' or 'reconstructed,' permanently disclosing their total loss history to future buyers.
Question 2: A vehicle with a 'certificate of destruction' (COD) title is:
- Required to be repaired and put back into service within 90 days
- Designated never to be retitled or returned to road use, typically for severely damaged vehicles (Correct answer)
- Eligible for rebuilt title status after passing a safety inspection
- A standard salvage title that has cleared state inspection requirements
Correct answer: Designated never to be retitled or returned to road use, typically for severely damaged vehicles
A COD is issued for vehicles so severely damaged (flood, fire, structural) that they must be destroyed and can never be legally returned to the road.
Question 3: In a total loss involving a leased vehicle, who typically owns the vehicle and receives the ACV settlement?
- The lessee, as the primary driver and responsible party
- The lessor (leasing company), as the legal vehicle owner (Correct answer)
- The lessee and lessor split the payment equally
- The dealer who originally sold the vehicle to the leasing company
Correct answer: The lessor (leasing company), as the legal vehicle owner
In a lease, the lessor retains ownership of the vehicle, so the ACV settlement is paid to the leasing company, not the lessee.
Question 4: Which of the following best defines 'diminished value' in the context of a vehicle that has been in an accident but fully repaired?
- The reduction in repair quality due to use of aftermarket parts
- The loss in market value a vehicle suffers simply due to its accident history even after full repair (Correct answer)
- The depreciation applied to the vehicle for its age and mileage
- The cost difference between OEM and non-OEM parts used in repair
Correct answer: The loss in market value a vehicle suffers simply due to its accident history even after full repair
Diminished value (DV) is the market value loss that persists after full repair because buyers discount vehicles with accident history.
Question 5: The '17c formula' is commonly associated with which aspect of total loss and valuation claims?
- Calculating salvage percentages for flood-damaged vehicles
- A structured method for calculating inherent diminished value used by some insurers (Correct answer)
- Determining total loss thresholds under state TLF laws
- Computing depreciation rates for high-mileage vehicles
Correct answer: A structured method for calculating inherent diminished value used by some insurers
The 17c formula originated from a Georgia court decision and is widely used by insurers as a baseline methodology for calculating inherent diminished value.
Question 6: When a total loss appraisal involves a specialty or exotic vehicle, the most reliable valuation method is often:
- Standard NADA or Kelley Blue Book guidebook values
- Comparable sales from specialty auctions, dealer invoices, and marque-specific experts (Correct answer)
- Replacement cost of a new vehicle of the same model year
- Applying a standard depreciation table to the original MSRP
Correct answer: Comparable sales from specialty auctions, dealer invoices, and marque-specific experts
Specialty and exotic vehicles require market data from specialty auctions and marque experts because mainstream guidebooks lack sufficient comparable data.
Question 7: An insurer issues a total loss settlement check jointly payable to the vehicle owner and the lienholder. This practice protects:
- The insurer from paying duplicate settlements
- The lienholder's security interest in the vehicle by ensuring loan payoff before owner receives proceeds (Correct answer)
- The vehicle owner from sales tax obligations on the settlement
- The state DMV's interest in collecting title transfer fees
Correct answer: The lienholder's security interest in the vehicle by ensuring loan payoff before owner receives proceeds
Naming the lienholder on the settlement check ensures the lender's security interest is satisfied before any remaining funds go to the vehicle owner.
CAADE Total Loss and Valuation 4
When a salvage title is issued to a total loss vehicle that is subsequently repaired and re-titled, it typically receives a: