Even auto insurers have to agree a buyback will increase TDI values
This all considering that a buyback offer would be transferable via sale. I have a suspicion that VW will offer buybacks to owners that owned the vehicle at the time the scandal made headlines. Those trying to make a quick buck by flipping vehicles may find themselves in a bad situation. As others have mentioned, that was the intention of the goodwill package. To entice owners to report to dealerships with the title, registration, and drivers license so they could record the data mileage/ownershp for future use.
Also, insurance companies are bound by the policies they sell. I will assure you that no insurance company will pay additional monies to a TDI owner in the event of a total loss because of a manufacture fraud case. Most insurance companies do not use KBB, NADA or Edmunds to value vehicles. They use 3rd party companies that do market research on their behalf for a fee.
I didn't state it, but I assume that VW will serve as a buyer of last resort for any and all TDIs from 2009 through 2015. CARB and EPA are pressing VW to either fix the TDIs or get them off the road. For this reason, VW will not care who they buy the car from. It would be nice if they could sell the person another VW, but VW will pay the buyback price to a "flipper" just the same as to a loyal customer.
You stated that insurance companies pay 3rd party market researchers to determine the values of vehicles, and are not going to add anything to those valuations to account for VW fraud. I agree completely. But those 3rd party recommendations have to be data based to withstand scrutiny.
If VW offers to buy any and all TDIs at their pre-scandal price plus an extra cash compensation, then all reported transactions are going to jump to at least the "floor" established by that buyback offer. I would expect auction and used car trade-in prices to rise to at least 95% the VW floor simply because it is so easy for a seller to get 100% of the price by selling the car back to VW.
While the number of private party and used car dealer sales of TDIs to consumers may decrease, I would expect all such sales to be at a premium to the VW floor price. If the seller doesn't get a premium, why go to the trouble of looking for a buyer other than VW? As a result, I expect the more desirable cars to be sold at premium prices justified by their condition & features.
I'm just speculating here, but private party and used car dealer prices are usually a certain percentage range higher than auction prices, but less than new car prices. I imagine that those percentage ranges don't vary too much from one make and model to another, but may change according to the overall price level and type of vehicle. From looking at Edmunds prices on the web, it looks like private party sales prices are 10 to 20% higher than trade-in, and used car dealer prices are 15 to 35% higher than trade-in. I assume that the third-party firms hired by the insurance companies publish similar numbers.
So I agree with your point that third-party firms won't assign any value to VW fraud. But they will report valuations that change when market price levels go up or down. When VW establishes a pricing floor at a level considerably higher than today's FMV, those third-party firms have to increase the valuations they report to their customers, the auto insurers. No matter why the depreciation curve shifts, they have to report reality to their customers.
Since September 2015, the depreciation curve for TDIs shifted down. But when VW starts their buyback offer, the depreciation curve for TDIs will shift up to reflect both pre-scandal prices and the $5000 extra cash compensation.
The insurance industry probably saw a similar artificial increase in used car prices during and after the "Cash for Clunkers" program. The Cash for Clunkers got the worst cars off the road, and the ones that were left all sold for more than the $3500 offered by the government.
I expect auto insurers to settle claims using current market conditions as a basis for totaling out cars. If they had been settling claims using "private party" price levels as reported by their third-party service, I expect insurers to continue using that basis. To do otherwise would leave them open to a class action suit.