Impact on tough economic times on Vehicle Valuation

Everybody knows things are tough. Inflation rate hit an 8-year peak at 8.78% in May this year, and the economic environment is wreaking havoc in the Kenyan car market, with vehicle sellers scrambling to adjust prices. Your car, once a predictable asset, now dances to the beat of market forces.

In January 2021, the Kenyan shilling stood at 109 against the dollar. Fast forward to November 2023, and it’s a different story – a 43% depreciation, trading at around 156. This dramatic shift affects everyone, from individual car owners to major insurers and banks. The result? Imported vehicles cost more, and their increased demand has inflated local market prices.

Add to this the effect of COVID-19 on the global supply chain, including the automotive sector. The availability of new vehicles fell, pushing up prices in the second-hand market. This surge in demand brought an unexpected twist – a change in vehicle depreciation rates.

Typically, trucks and commercial vehicles depreciate at 12.5%-15%. Now, the tides have turned, with rates drop- ping to around 10%. Private vehicles show an even more startling trend. From the usual 10% annual depreciation, we’re seeing rates as low as 5%, and in some cases, vehicles are retaining their value entirely.

What impact does this have?

For vehicle owners, insurance values must reflect this new reality. Regular valuations are essential, to avoid discrepancies in the unfortunate event of a claim. Insurance companies face a new challenge – ensuring 100% compliance in their annual comprehensive book to ward off fraud and customer disputes.

Banks and Financing companies are not left out. Accurate vehicle valuations safeguard against overfinancing, protecting you in case of loan default scenarios.

At Solvit, we combat fraud and enhance customer experience in vehicle valuation. Our on-demand asset inspection platform verifies a vehicle’s existence, condition, and current value benefiting various stakeholders, including insurance companies, banks, and vehicle owners.

We prioritise convenience, conducting inspections at the customer’s preferred location and time.

Discover more about our services and get your vehicle or fleet valued.

The writer is the Managing Director at Solvit