Market Value vs. Forced-Sale Value
A valuation report lists two key figures:
- 1. :
- 2. Market Value: The estimated price the vehicle would sell for under normal market conditions between a willing buyer and seller.
- 3. Forced-Sale Value (FSV): The value the vehicle would fetch if sold quickly in an auction, typically under distress (usually 70% to 80% of the market value). Lenders always calculate their loan limits using the lower Forced-Sale Value, protecting their capital in case of default.
Approved Valuation Firms in Kenya
Lenders do not accept valuation reports from any local garage. They have a strict panel of approved professional valuation firms, including AA Kenya (Automobile Association), Regent Valuers, and Quest Valuers. To get a valid report, you must physically present the vehicle to one of these firms, pay a valuation fee (usually KES 3,000 to KES 5,000), and supply the logbook copy.
What Valuers Look For
Valuers conduct a physical audit of the car:
- 1. :
- 2. Year of manufacture and model trim.
- 3. Odometer reading: Lower mileage results in a higher valuation.
- 4. Mechanical condition: Engine compression, gearbox engagement, suspension noise, tyre tread depth.
- 5. Body and paint condition: Evidences of previous accident repairs, mismatched paint, panel dents.
- 6. Interior wear: Torn upholstery, missing knobs, dashboard cracks.
Loan-to-Value (LTV) Calculations
Suppose you want to buy a car priced at KES 2,000,000, and the bank offers an 80% loan. If the valuer assesses the car's Market Value at KES 1,800,000 and its Forced-Sale Value (FSV) at KES 1,440,000: The bank will base the 80% loan on the FSV of KES 1,440,000. Your maximum loan amount becomes KES 1,152,000 instead of KES 1,600,000. You must raise the remaining KES 848,000 in cash as a deposit!
How to Prepare a Car for Valuation
To secure the highest possible valuation:
- 1. :
- 2. Clean the vehicle thoroughly, inside and out.
- 3. Repair minor body issues like bumper scratches or small dents before the inspection.
- 4. Fix warnings on the dashboard (e.g. check engine light, ABS light).
- 5. Present the vehicle's service history books to show diligent maintenance. A well-presented car can secure a valuation difference of up to KES 150,000.