The problem with paying him so much money is that he's 32. The deal will almost certainly be good for next season and there's a good shot that he'll have decent returns in 2012, too. The problem comes in those next years. Catchers drop off very, very fast and V-Mart is getting towards the decline phase of his career. If he has to switch to 1B/DH, his bat becomes decidedly average and certainly not worth $12 million.
Ok, let's just say VMart's catching ability drops off very fast which may or may not be true. Just off his bat alone, VMart is probably making too much at 12mil/yr so definitely agree. Although I wouldn't say his bat is "average" though.
I ran a quick search in Baseball-ref for: last 3 years, OPS>.800, Batting average > .295, and 1000 plate attempts. VMart ranks 25th in OPS and 24th in BA.
The guys with the most similar performances are:
1) Markakis (11mil/yr-age26 when signed in 2009/ slightly better numbers than VMart's/ .306BA/ .897OPS) last 3 years
2) Vlad's 2009 signing for 5.5 (age34) with Texas coming off a .295 BA/ .794OPS year.
3) Magglio Ordonez's last 3 years (15~mil/yr in 2004 money@age 30/ but came off down year .292BA/ .836OPS so speculation he was declining even though he had monster numbers 2000-2003).
Since there aren't many players who are similar to VMart's offense, that is all we have to go off for contracts for similar batters.
Basically we can say that VMart's bat alone is worth between Vlad's 5.5mil and Markakis's 11mil. Both were in 2009 so not much inflation. However, Vlad was 2 years older and Markakis 6 years younger. So we can definitely knock 2-3~ mil/yr off the top of Markakis's 11 mil for age alone but add at least 1-2~ mil/yr over Vlad's. This would put VMart's batting value max range window at around 6.5mil to 9mil range. Factor in the fact that Detroit overpays + he's a catcher and the 12 mil number seems like it should be close to where it should be.
So should Detroit lose him at catcher and have to use him as a DH, they would be overpaying him by 3 to 5.5mil a year. Not a huge number but still significant - you could purchase at least 2 decent bullpen guys for that money. Hopefully VMart will stay healthy and Detroit gets max value.