Accidents can leave a lasting physical and financial impact on you and your vehicle. Even a single collision negatively affects the market value of a vehicle, ultimately affecting its resale value. While cosmetic collisions that cause dents and scratches may not make a difference, that may not be the case for significant damage, like a head-on collision on your drive to work. Even a minor accident, like a fender bender, once reported to the insurance companies, will affect the sales value of a vehicle.
Here’s what you need to know about diminished car value after an accident and how you can calculate it to negotiate with insurance companies.
What Is Diminished Value?
Every car has a unique value, based on its age, mileage, collision history, and many other factors. After a crash, that value is drastically reduced by the addition of a collision to its vehicle history. This reduction in value, known as its diminished value, is simply the difference between your vehicle’s value before and after an accident. Even in the face of high-quality repairs that have restored your vehicle to its original condition, your vehicle’s value will be permanently reduced.
There are different types of diminished value that you can claim, depending on your circumstances.
Types Of Diminished Value
There are three types of diminished value. Each of which is used to file a diminished value claim based on your specific situation:
Inherent Diminished Value:
The inherent diminished value is essentially caused by the stigma that drivers have for vehicles that have been involved in an accident. It occurs when a vehicle loses value solely for being in an accident, regardless of the quality of repairs. Many drivers believe that a vehicle with an accident history is directly linked to a road full of costly repairs and hidden problems— making it one of the most common types of diminished value cases.
Immediate Diminished Value:
Immediate diminished value occurs right after an accident, before any repairs are made, which is where it gets its name from. This type reflects the loss of value right after an accident, regardless of the extent of damage. Drivers can file a claim for this loss against the at-fault driver’s insurance company to seek compensation for the loss in value. To file, you may need a professional car appraiser to assess the diminished value of your vehicle to receive maximum compensation.
Repair-related Diminished Value:
In this case, the culprit behind the loss of value is the quality and extent of repair. This can occur if you use aftermarket or non-OEM parts that fail to restore the vehicle to its original condition before the accident.
Factors Affecting Diminished Value
Multiple factors play an important role in the overall depreciation value of your vehicle, which can often influence how much money you can recover from your claim. Some of the common factors are:
Severity of the accident:
The extent of the severity of the accident matters, especially if it can affect the reliability of the vehicle for long-term use. The more significant the damage, the greater the loss in value.
Age of the vehicle:
Newer vehicles with low mileage typically suffer a large blow to their value after an accident, as potential buyers expect them to be in pristine condition due to their higher initial value. Comparatively, older vehicles will not depreciate at the same pace after an accident.
Mileage:
Vehicles with lower mileage tend to experience greater diminished value because they are typically perceived as having less time on the road. With more time on the road, many cars tend to lose their value, reliability, and have higher maintenance costs.
Make and model:
Luxury vehicles from high-end manufacturers often experience drastic diminished value after an accident which can significantly impact their resale value.
Calculating Diminished Value For An Estimate, Step by Step
You can gather a rough idea of how much your car has lost value after an accident by following these basic steps:
Calculate the value of your car
The first step is to calculate the market value of your vehicle. You can refer to similar vehicles online or compare market trends to get an average. A professional car appraiser can offer you assistance in this department.
Apply a 10% cap to the value
Insurance companies apply a base loss value of 10% from the original value of your vehicle prior to the accident. Let’s say the value of your vehicle was $60,000, so you’ll multiply it by 0.10 to get your base loss value, which is $6,000.
Apply a damage multiplier
The next step is to adjust the base value based on the severity of the damage to your car. The base value is then multiplied by numbers ranging from 0.0 to 1.0, depending on the damage your vehicle suffered. Carefully assess the level of damage before making any calculations:
- 1.00 = Severe structural damage
- 0.75 = Major damage to structure and panels
- 0.50 = Moderate damage to structure and panels
- 0.25 = Minor damage to structure and panels
- 0.00 = No structural damage or replaced panels
If your vehicle has suffered minor damage, then you’ll calculate the base loss value &6,000 x 0.25, which leaves us with 1,500.
Apply a mileage multiplier
Your mileage plays a major role in calculating an estimate of your car’s value, especially in front of insurance companies.
- 1.00 = 0 – 19,999 miles
- 0.80 = 20,000 – 39,999 miles
- 0.60 = 40,000 – 59,999 miles
- 0.40 = 60,000 – 79,999 miles
- 0.20 = 80,000 – 99,999 miles
- 0.00 = 100,000 miles or more
After calculating your odometer reading based on the table, you’ll get the final number which is your diminished value.
Disclaimer: Every used vehicle is unique. The formula provided offers only a rough estimate of the potential value of your diminished value claim and should be used solely to understand a general range. The actual diminished value of your vehicle may be higher or lower than this estimate. At American Auto Appraisers, we utilize a proprietary valuation formula that incorporates real market data and expert analysis to determine an accurate diminished value.
Taking the Next Step: Filing A Diminished Value Claim
Filing a diminished value claim can be possible only if you’re not at fault, so if you’re behind the collision, chances are you may not recover full compensation. By gathering documents and working with a car appraiser to build a strong case, you can move one step closer to securing your compensation.
Can You Negotiate A Diminished Value Claim?
In a nutshell, yes. Insurance companies may offer you an initial settlement based on their own calculations, which can be revised upon further discussion or viable evidence. Gather documentation or submit a certified car appraisal, reflecting the actual diminished value of your vehicle, to secure your rightful compensation.
Professional Car Appraisals For Accurate Diminished Value
If you’re struggling to calculate or substantiate the diminished value of your vehicle, American Auto Appraisers is available to assist you. Our professional appraisers are available to help you make a fair valuation of your vehicle. We provide reliable diminished value appraisals combined with real-time market data and years of experience to reflect accurate numbers that insurance companies can’t ignore.
