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What an official appraisal looks like, and why you would want to spend $165 getting one done...
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July 5, 2005
A Sad Update,
or
How Even Teggers Can Make Mistakes...

Stupid me. I should have talked to my insurance company first before getting the appraisal done.

After receiving the policy endorsement forms to sign, I saw that it showed that I wanted a maximum limit of $2,750, or "actual cash value", whichever was less. This was not what I expected, so I called the insurance company and talked to someone in Claims (yes, I should have done that in the first place...).

It turns out that the appraisal means absolutely nothing to them. What counts is the condition of the vehicle at the time of the loss claim. The claims adjuster told me to check AutoTrader and see what comparable vehicles are going for in the real market. That is the sort of thing they base their loss valuation on. My car, according to listings in AutoTrader, is probably worth around $1,000 to $1,500 as a total loss.

And if you get improvements done to the car? What counts to increase the car's value? According to the claims adjuster, "normal wear-and-tear" items do not count. Engine rebuilds, transmission rebuilds, new clutch, none of that counts. So what does count? Aftermarket rims, new paint job, aftermarket spoiler,custom stereo, that kind of thing. The claims adjuster did confirm that the recovery value of such add-ons is about 30%.

In summary, the appraisal was a waste of time and money. And it is shameful that the appraiser, who has been in business for 25 years, did not tell me about any of this. Guess he just wanted my $165 bucks. If you decide to get your car appraised, call your insurance company first! What I was originally looking for is called "Agreed-Value", which is not offered in my province's tightly-regulated insurance market, except for classic and collector cars.

None of the foregoing changes my math in the document below, except for the addition of the appraised value, and possibly some of the depreciation amount.

Anyway, on to the original article:


Why appraise?
There comes a time in every car's life when it becomes Just An Old Car. When I was younger, 1957 Chevrolet Bel Airs were like that. I remember them smoking and listing around town, leprous with rust, left to moulder in  the corners of deserted parking lots before being hauled off to the crusher. And what's happened since then? Now they're collectibles.

Japanese cars are a bit different from that. Other than a few select models, such as the Datsun 240Z, the Mazda Miata, and possibly the Toyota MR2, most Japanese cars will NOT ever be collector's cars. And with Just An Old Car, nobody wants to spend anything on them, so they become even more of Just An Old Car, even more run-down and decrepit, and eventually they become Just A Crushed Wreck On The Back Of A Flatbed Truck.

My Integra is Just An Old Car, especially with its mileage, and it's certain to remain that way. I'm not interested in keeping my car for any collectible value it may or may not ever gain. In the end, a car is just a car. It's made to be driven. As long as it's reliable, one car is just like any other, so it really doesn't matter what you drive as long as you're happy with it. I just don't want to lose my shirt by keeping an old car around. Any emotional attachment you might have to that Old Car has to be tempered by a rational assessment of why you're keeping it, and how much it's really costing you to do it. Once there is no emotional or economic sense in keeping a car, that's when you get rid of it.

So what do you do if you have Just An Old Car, and you want to keep it from becoming a crushable wreck? The biggest danger is that you may put a couple of grand into it, then some drunk comes along and totals it, and all the insurance company will give you is $500. So what to do? Figure out what it really costs to keep the old car (or a new one), and then get an appraisal, that's what.
Now let's do some math: A new car will require several thousand as a down payment. Let's say the car will cost you $17,000. You want to get your payments down, so you pony up $3,000 as down payment. Now you have $14,000 to pay back in, say, 5 years. At 6.25% for a bank loan, that's a payment of about $270 per month for five years. Plus tax. Plus repairs. Plus maintenance. Plus that downpayment (money no longer yours). And you can NOT miss a payment during that time, or risk repossession. Your actual cost of that new car is probably closer to $360 per month for five years. That's a total expenditure of $21,600. And at the end of that time you've got a car worth around $10,000. This means it's cost you $11,600 in five years for the privilege of driving this new car. That's almost $195 per month over five years.

Now suppose we keep this car well past its paid-off point. Suppose we keep another five years. We've paid off the dealer or the bank, so there are no payments to make. $270 comes off the cost each month. But at the same time, the car's value will probably decline to about $2,000 by the time it's ten years old. So you're saving $270 per month, but you're also losing $135 per month in value. Therefore your cost of carrying the car is $135 per month, plus repairs and maintenance. If you budget for $1,600 a year for upkeep, you're up to the cost of a new car again, but then you'll end up with basically a new car anyway after all those repairs. And most of those things are elective, meaning you don't HAVE to come up with the cash every month, but can do it when you have the money, and you can decide what's worth fixing and what's not. With proper maintenance, it's unlikely you'll have major repairs before the car is more than ten years old, so $1,600 per year is a pretty generous upkeep budget.

Once the car is over twelve years old, it essentially stops declining in value, so there's $135 more per month that can go into your pocket or into upkeep. This means your carrying costs have gone from $135 per month down to $0. And if you want to keep the car like-new, the potential upkeep budget is now $3,240 per year before you get back to the carrying costs of a new car. That allows for a  LOT of fixup. And if you don't use the whole available fixup amount (and you won't even be close if you've been diligent about repairs and maintenance), then it's now cheaper than a new car, even if something very big breaks.

If you don't require $3,240 per year in fixup, the surplus money can stay in the bank, earning interest (however little), and eventually going towards big-ticket items like engine rebuilds. My usual actual upkeep costs every year are less than $1,200. For just one year (2003) the car cost me over $3,000 in repairs. I had scads of work done, and did not skimp at all: When the one balljoint broke, every balljoint in the front end was replaced with OEM, including both upper A-arms, both tie-rod ends, and the steering rack boots; when the head gasket failed, I took the opportunity to replace the timing belt, water pump, the rad, and a bunch of other small parts. All with OEM, again, except for the rad. This investment has paid off, as the car was immediately back to its usual boring, uneventful self and has remained so since. My mechanic thought I was nuts at the time. But then, he hadn't done the math...

And if you get the car appraised, you have that added bonus of being able to recover more than "basic transportation", plus 30% of any major repairs. For a $165 appraisal, my car is now worth $2,750, a minimum of $1,250 more than "basic transportation", which is just icing on the cake. (Warning: See the Update, above).

Appraisers: Two species of them

There are two kinds of appraisers: Damage appraisers, and Evaluation appraisers. The Damage appraiser works for the insurance company. He checks out your car after the drunk runs into it, and decides whether or not it's fixable without running into a total-loss situation (that's the famous "write-off"). An Evaluation appraiser does nothing with damaged cars. He's called in by you, not your insurance company, and his job is to inspect your car for the purpose of  attaching to it a value that the insurance company will accept as total-loss value IF the worst should happen. NOTE: CALL YOUR INSURANCE COMPANY FIRST. NOT ALL WILL ACCEPT APPRAISAL VALUES!! (see Update, above)

The advantage of buying the services of an Evaluation appraiser is that you can make sure  that you can get back at least a portion of your expenditures on the vehicle in the case of total loss. The insurance company may default  to $500 value for Just An Old Car, but if you can show that your car is genuinely MORE than Just An Old Car, you can recover enough of your investment to make the carriage and repair of an older vehicle worthwhile, even if you don't get back every penny of what you spent.

Of course, all the foregoing assumes you will be keeping the car. The  appraised value is NOT what you can sell that car for. The insurance company's total-loss value might be $2,750, but the average street buyer will still see a 1991 Integra with 250K on it, not $2,750.

Since I'm not interested in selling, all I want to do is be able to recover part of my costs of upkeep. There are certain restrictions, though. Conservatively, the most you'll be able to recover of any major expenditure is 30%. It CAN be up to 50%, but then you're getting into serious insurance scrutiny at that point, so your appraiser had better have a pretty credible argument to give the insurance company to justify that 50%.
(Warning: See Update, above)

Summary:
In short, it's either cheaper or the same overall cost to you to keep an old car going than it is to trade it in after five years. Suddenly it makes sense to replace that head gasket on the old girl.

For any of the foregoing to make sense for you, you have to like your car and want to keep it as new as possible. Many people get tired of driving the same old car around, and will eventually find a reason to get rid of it, just so they can justify getting a new one.

I like my car, and I like fixing it. It has no airbags, no OBD-II, no ABS, no fancy electronic gizmos. It's as modern and complex as I want it to get. I deliberately bought it with as few options and bells-and-whistles as it was possible to get, in the interest of longevity. In other words, I expected to keep the car practically forever, right from the start.

For me the interest is in seeing how long I can keep it looking good and driving well, how high I can make the odometer go, and the adventures of seeing what's going to break next and how to fix it. I like knowing the entire history of the vehicle. This car did not really feel like "mine" until I started doing my own repairs. Pretty much the only thing at this point that would result in me getting rid of the car is terminal rust, or a serious collision.

Anyway, now that I've stated my rationale for keeping the car and getting it appraised, below is the actual appraisal. I got two copies. One is the "original", with photos (similar to these), that went to the insurance company. The other is my copy. My copy is the one shown below.

The appraisal:
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