Collector Car Appraisals

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What’s My Car Actually Worth?

Appraisals are often triggered by some type of transaction you didn’t expect. You’re getting a divorce and her lawyers are disputing your claim that the car is only worth a few thousand dollars. Or, your insurance company is questioning the estimate for repairing your car. Remember when you donated your car to that museum? Now the IRS is asking for more documentation. All of these things will more than likely involve a lawyer and in many cases a judge. Will your appraisal hold up in an arbitration hearing or in court?

You have to assume that  the value of the vehicle in your appraisal report will be disputed in an arbitration or a court room. The IRS will look at the competency of your appraiser to ensure that you’re not overstating the value of the donated property.

The best way to minimize any problem is to hire a professional appraiser who follows the guidelines in IRS Publication 546 “Determining the Value of Donated Property.”  The IRS generally recognizes any appraiser who adheres to the Uniform Standards of Professional Appraisal Practices.

David Kinney (www.usappraisal.com) recommends that you look for membership in the professional appraisal organizations. There are dozens of organizations that grant some form of certification but you should look for accreditation from The American Society of Appraisers (www.appraisers.org) or the International Society of Appraisers (www.isa-appraisers.org). These are two very professional organizations and may well be the gold standard for appraisers.

A Charitable Contribution: You may feel that the best way to express your legacy is to donate your cars to a museum where others can enjoy them. The Association of Art Museum Directors estimates that more than 90 percent of art collections held in public trust by American museums were donated by private individuals. 
Museums exist in perpetuity and they have trained staff members who can take care of your collectible cars. Once you donate your car to the appropriate foundation or museum you’re eligible for an income tax charitable contribution deduction.

All of your tax planning, and especially the appraisal work needs to be done prior to the time the actual gift is made. You should also have your lawyers add a provision that prevents the museum from selling your car for three years from the date of your gift. Any sale before the three-year limitation could jeopardize your tax deduction.

A Damaged Car: Consider if your $1.3 million Porsche RSR is wrecked or stolen just a few months after it was appraised. The insurance company, will take a really close look at the appraisal document you forwarded to them.

Most appraisers use a combination of three things. First is recently recorded public sales of similar vehicles. The second is published figures in price guides such as NADA, which may not be relevant to your situation. The third is appraisers knowledge of the market. This will be in a logically orgaiized document which will not only state the value of your car but how that value was reached.

If your insurance company comes up with a lesser value for your wrecked RSR you have an issue. Your appraiser may well be asked to participate in a legally binding arbitration, or perhaps in a court hearing as an expert witness. You want this appraiser to be a professional.

Diminished Value Appraisal: If your collector car is damaged an appraisal report might be use to support the value of parts and work that was done in the preservation or restoration of the vehicle. 

Chances are the insurance company has not offered you what you are entitled to. Any portion of a Diminished Value or Prior to Loss claim that is not paid can also be written off on your itemized income taxes including the appraisal fee to have the diminished value appraisal performed. 

How Much Will This Cost Me?  The cost of an appraisal depends on the time required to examine and asses the quality of the car. That means it is always best to find an appraiser that is close by. Before any appraisal is initiated the appraiser should provide you with their hourly rate, plus some estimate of the time required. If the appraiser cannot furnish you with such an estimate, it suggests the appraiser does not have experience in this particular area. You should move on to the next person on your list.

Normally an appraisal will cost from $500 to $700. That though does not include travel time which is usually billed at an hourly rate. Before hiring anyone to appraise your collection always ask the actual person who is coming out to inspect your collector car to email you their professional resume. If it shows less than ten years of experience in the field you might want to keep looking

If the appraiser claims to be a ‘certified appraiser’, ask how long they have been certified and who is the certifying agent. Remember the gold standard is Uniform Standards of Professional Appraisal. It might be best to determine if they have ever argued a case before the IRS. You just never know. Don’t wait for the IRS to call you. Be ready for that phone call.

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