How to Calculate the Value of Salvaged Vehicles

July 15, 2014

Salvaged vehicles can be valued in different ways by different insurance companies. There is no actual standard formula on how to calculate the value of salvaged vehicles because it depends on the type, make and model of the vehicle. It also depends on how much damage is compared to the cost of the vehicle in it's present stage. Insurance companies appraise their value to as much as 80% less than the original cost of purchase. They do not follow any standard percentage to compute the value of the vehicle, but they determine this value on whether it can still be salvaged or it should be considered a total loss. Other insurance companies, however, are open to the "buy-back" scheme rather than selling it to a junk vendor. If you decide to offer salvaged vehicles for sale, here are a few guidelines you can adopt to fairly calculate the value of your salvageable vehicle:

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1. Check the Details of the Vehicle

Determine the type, make and model of the vehicle, including its retail value on the date of purchase. Using the Kelley Blue Book may also help you determine the cost of the vehicle and its retail price.


2. Reduce 50% of Retail Cost

You can either automatically deduct 40% to 50% from the retail cost to get the approximate value of the salvage vehicle or have your car appraised by a reputable junk vendor. Please note, however, that deducting 50% from the retail cost does not actually give you the value of the salvaged vehicle. This will only give you a ballpark figure. The percentage of what to deduct depends on the actual damage to the vehicle. If you refer this to any insurance company, they normally deduct about 75% to 80% from the retail cost.


3. Calculate the Current Market Value

Add the retail cost to the appraised value or estimated value of the insurance company and divide it by two to get the current market value. This way you get the mean, or the average rate of the price. You can also use the percentage of depreciation to determine the current market value of the vehicle.


4. Multiply it by % Used by Insurance Company

After getting the current market value, multiply it by the percentage used by your insurance company. The result becomes your approximate value of the salvaged vehicle.

For a guide on the rates of vehicles, check the Kelley Blue Book, a trusted valuation company for the automobile industry. You can get information from KBB.com as to how much a second hand vehicle will cost as well as its trade-in value. The appraisal made by a junk vendor is valued for profit. Therefore, combining both estimates and dividing the number into two will give you a marginal and fair value to salvage the vehicle.

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