There has recently been some discussion regarding my purchase of a vehicle at a dealer auction for use in the challenge.
https://grassrootsmotorsports.com/forum/grm/challenge-question-dealer-licence-car-purchas/104935/page1/
https://grassrootsmotorsports.com/forum/grm/legal-gambling-rolling-the-dice-and-how-i-acquired-my-2015-challenge-car/104898/page1/
I want to be fair and above board on the build which is part of the reason I have posted it on the board. I also don't want to be unfair to my fellow competitors either, so my question for the hive is what is a fair market value for a broken car?
The car in question is a 1999 Lexus GS400. According to KBB.com it is worth $3800 in fair condition to $4300 in good condition. Kbb.com puts its trade value at $3280. Honestly this car falls into fair to good range.
This car running brings between $1200 and $4800 depending on condition at the auction according to Manheim MMR, with most trading in the mid 2000 range with an average of 200k miles.
The car I bought was simply listed as a 1999 Lexus GS400 "Non runner". It was parked in the inoperable area at the auction (Carmax). I spoke with the auction rep and he stated simply "we bought it from the previous owner broken." Apparently it showed up on a tow truck with no explanation as to why it didn't run. Before the auction I looked it over for approximately five minutes. I didn't have any tools and you are not allowed to dismantle a car at the auction obviously. The car had a key with it but its battery was completely drained and I couldn't even test the windows or try to start it etc...
I rolled the dice and won the vehicle for $900.00. The auction charges a $130 buyers fee and my buddy charges me $150 to use his dealers license. I am in the car for $1180 without knowing why it is broken or what it will take to make it roadworthy. I found out after the sale that Carmax bought it for $300.00 or a third of what I paid for it.
Based on its weight it would probably bring about $400 for scrap.
I would argue that an auction is a pretty fair way of determining a value. The were at least a 100 buyers present when the car came up for bid. They had the same opportunity to look the car over and were aware that it was inoperable for an unknown reason. When the bidding was over I won the car for $900 plus fees. If the car was "worth" more then that it would have been bid higher.
So the question is am I off base in my valuation because it was a dealer only auction? What would the car bring on craigslist? ebay? Is there a better means of determining its value, if so explain how you arrived at that figure. Please don't make the judgement based on the fact that a starter fixed the problem, look at it from my perspective at the time of purchase.
If you payed $1180 for it, thats that. I dont see why it should be "valued" at more than you payed. Whats fair is fair. Theoretically if someone buys a f40 from some widow who doesnt know its worth for $500 and wants to challenge it I dont see why they would change the value to $500,000 because it only needed a battery.
In reply to chiodos:
I am just try to be above board and stay within the rules of the challenge. I am in this for fun and don't want to step on any toes or do anything that isn't within the spirit of the event. Basically this is a great event and I look forward to it every year, I just don't want there to be any animosity or unhappy competitors due to how I acquired my vehicle. If that is going to be the case I would rather resolve it now vs at the event 
I am in a similar situation with my x type. See my post in the dealer license thread I started.
The value of a broken car is what someone will pay for it that is above scrap metal price.
If the car came from an auction, and more than one person bid on it, I see no reason why that shouldn't be a legit fair market price.
dean1484 wrote:
I am in a similar situation with my x type. See my post in the dealer license thread I started.
You are in a little different situation but I appreciate the support. You bought it from a dealer for a price they agreed to sell it to you for, not from an auction. You are 100% within the rules.
I look forward to racing you in the aristocrat class in October, we have an american car, an english car, a german and two japanese signed up so far. Axis vs. Allies!
HappyAndy wrote:
The value of a broken car is what someone will pay for it that is above scrap metal price.
If the car came from an auction, and more than one person bid on it, I see no reason why that shouldn't be a legit fair market price.
There were three of us bidding and at least 90 others standing in the lane watching.
Pretty clear your cost is $1180. You didn't need any special licence to get it for that price, your buddy did but he charged you for his services.
If we have to assign proper value to cars that we got good deals on through a combination of skill and luck I'm in trouble. 
pimpm3
Dork
8/22/15 10:34 p.m.
The previous seller could have sold it to anyone but he chose to sell it to carmax for $300.00 relative to them I paid a whole bunch 
In the aristocrat class do we need ham and cheese dagwoods with grey pou pon mustered being passed between car as we go down the course?
I would have had an issue possibly with the dealer license, but you paid your buddy $150 for use of it. How would that be any different than paying a buddy $150 to do some welding on it? If you live near Watkins Glen and you dumpster dive a set of used up Hoosiers, is that fair/unfair to the guy in Montana that isn't within a 1000 miles of a racetrack?
Luck often plays an important part of Challenge builds. You lucked out in that a buddy has a dealer license for use.
In addition to luck, it's pretty obvious that resourcefulness is a big part of doing well at this. I wouldn't be justified complaining about it not being "fair" that I wasn't clever enough to secure a 'paid consultant' to get me access to a Carmax auction, any more than I would be justified complaining that it isn't "fair" that I don't even have a Carmax auction near me, or that I've never driven past a car being sold for $50, or that I don't have a friend with a full fabrication and engine building shop in their garage, or that I'm not retired such that I could put 40 hours per week of 'free' labor into it...or any other such excuse.
Value paid at auction, especially against multiple other bidders, is a fair market value...Especially considering it's also more than the recently acquiring seller has into it, which pretty well covers the "inside deal" clause. On top of that, I don't even thinks it's an unreasonable market valuation for the non-running unknown-problem condition that the car was in when you bought it. I'd say that alone makes it as "fair" as it ever need to be.
There is a known running SC400 near me listed for $800...It could just as easily be argued that you may have overpaid, and that the fair market value is actually less than that. 
The car traded for $900 in a well-attended auction event. So it's worth $900 plus $130 in auction fees.
I think what you should be thinking about is what is the fair value of using your friend's dealer license.
DWNSHFT wrote:
The car traded for $900 in a well-attended auction event. So it's worth $900 plus $130 in auction fees.
I think what you should be thinking about is what is the fair value of using your friend's dealer license.
I pay him $150.00 to use the license. My fellow "Aristocrat" competitor John paid the same fee when I bought him his Q45. If I sell the 1994 Accord in my other thread the same fee will be charged to that buyer.
In reply to Datsun1500:
As long as you paid and budgeted for the professional service, or offered the same services to the other entrants at the same price you have budgeted for it, that's as "fair" as anything else. I'd bet that the inequality of resources available to each builder for completing their entry within the budget is typically less "fair" than the difference dealership auction vs private party pricing for broken cars. FMV doesn't mean it actually had to be bought off the street, just that the price in the budget can't be less than reasonable for 'street' pricing.
I have seen no indication or actual argument that this isn't reasonable street pricing for a non-running, unkonwn-problem, 150k mile, 15+ year old, GS400, especially when considering some of the other advantageous private party sales I've seen for varying degrees of presumably broken cars...Some of which have been the topic of prior discussions on this forum.
The simple fact is that there was a general question asked by one participant and the poster wanted to clarify his specific case.
Your car has an original purchase value of $1180.
Thank you for erring on the side of caution ;)
