When people get a divorce (especially those in community property states like that of California), all of their property, including such personal property as classic or collector automobiles and other vehicles, must be appraised. Once given a full valuation, those vintage “thing(s)” are tossed into the mix of assets – items that will be ultimately divided.
May not sound like a big deal, but I once handled a divorce where their classic Bugatti was worth more than all their other assets combined. That may seem outrageous, but when you consider that Ralph Lauren’s 1938 57SC Bugatti is worth $40 million, it is not too far-fetched to think about that old jalopy you and your spouse have kept stored or around the property and what it might be worth. Just think of what someone like Jay Leno could stand to lose, should he ever get a divorce from his wife: Last count he owned 286 vehicles—169 cars and 117 motorcycles! It’s estimated that his vintage vehicle stash is worth an estimated $50 million!
How are Classic Cars Appraised to Determine their Worth?
It starts with classic car appraisal from a reputable source. Appraisers of classic cars will typically look at three distinct types of data:
- Recently recorded public sales of similar vehicles, also known as “comps”;
- Published figures in price guides such as the National Automobile Dealers Association (NADA) Guide (which will be recognized by the Court pursuant to “Judicial Notice,” California Evidence Code Section 452(h)); and
- The individual’s knowledge of the market.
Which “comps” will an appraiser consider and ultimately use? The values of “comps” can vary dramatically. A very nice 1981 Porsche Targa 911 SC might trade hands locally for $40,000 to $50,000. But recent sales on eBay run much lower – closer to $30,000. The same car at the Barrett-Jackson auction in Scottsdale, Arizona could easily fetch over $75,000. Yet, the NADA and Kelley Blue Book (kbb.com) guides place the value somewhere in the middle, around $45,000.
Which “Comps” will an Appraiser Consider in Classic Car Appraisal?
To answer that question, one first needs to understand that the classic or collector auto will be appraised at the fair market value (FMV). FMV is generally the amount that would be obtained were the asset to be sold under normal conditions pursuant to California Code of Civil Procedure Section 1263.320. Most appraisers use the following, slightly modified definition of FMV: The price that the vehicle would sell for on the open market, between a willing buyer and a willing seller, with neither party being required to act, and both parties having reasonable knowledge of the relevant facts.
The part of the definition that refers to “neither party being required to act” eliminates the Barrett-Jackson auction, where buyers have about 180 seconds to make decisions. Likewise, the low eBay figures cannot be relied upon as the only “comps” because of the part of the definition that reads “and both parties having reasonable knowledge of the relevant facts.” In eBay transactions, only the seller has those facts and the buyer must rely upon the seller for this information. Interestingly, the published NADA figures are usually just about right because they are derived quarterly predominantly from reports of actual sales that are provided to them from a variety of sources.
Some parties choose to testify on their own behalf as to their perceived values of their automobiles. They are permitted to do so by California Evidence Code Section 813(a)(2). However, the Court is then permitted to ascertain and to make a finding as to the reliability of the owner’s testimony, as well as the source of backup information for his or her opinion. In general, owner-provided valuations should be avoided because of the real possibility that the court will seriously discount either their credibility or the sources of their information. That said, if you are trying to sell a classic car owned by a celebrity like a Clark Gable or Howard Hughes, the name value along could fetch a pretty penny. Generally, people like to boast about having items once belonging to big-name celebrities, like a ball gown worn by Jackie Onassis or Marilyn Monroe, so why cars be any different.
Rare Classic Cars: What if no Comps Exist?
And what about the argument that a particular automobile is so rare or so exceptionally outfitted that no relevant market value exists? California covers that alternative as well. California Evidence Code Section 823 provides that notwithstanding any difficulties in ascertaining the market for a piece of property, the Court may rely on “any method” of valuation that is “just and equitable.”
The lesson in all this is to literally take stock of all your assets, not just real property, furnishings and bank accounts, but also collectables, and that includes your precious collection of those vintage automobiles. If you’re made to sell those cars as part of the divorce settlement, make sure they are properly appraised and that they, just like the two of you getting the divorce, are being treated fairly!