Loss of Value
Did you know that an accident decreases a car’s value, even after being repaired?
The loss of value after accident has a name. It's called Diminished Value (Diminution of Value), and it impacts virtually every vehicle repaired after an incident. Diminished Value is calculated as the difference between the market value before the accident and the market value after being repaired. Regardless of how well repaired, the vehicle is now perceived as less desirable and thus valued less.
Vehicle history report services such as Carfax and AutoCheck have given rise to Diminished Value. One main reason is that these reports reference most accident repairs. Compare two otherwise identical vehicles. The one repaired after an accident became instantly less marketable and thus valued less than its accident-free twin.
Diminished Value Claim
It is possible, though not easy, to be reimbursed for the Diminished Value. Such a claim is processed separately and after the insurance repair claim. If your vehicle caused the accident, then you likely have no recourse for Diminished Value. But if you were not at fault, then you may have a legitimate claim against the insurer of the at-fault vehicle. Depending on factors such as vehicle model, age, mileage, condition, accident severity, and the state in which you reside, it may or may not be worth the effort.
A claim for Diminished Value can be initiated by you as insurance companies are not motivated to volunteer payments for loss of value after having just paid to repair both vehicles. Your formal demand would need support documentation such as a professional appraisal declaring market values before accident and after repair with justification for those values.
Diminished Value Amount
If the insurance company acknowledges your claim for loss of value because of the accident, their Diminished Value offer may be insufficient. One simple reason is that a reasonable amount is difficult to ascertain and calculate. Moreover, there is no verifiably accurate means to know the actual loss in value unless you immediately sell the car after repair. Even then, the market value assigned before the accident is speculation. And it could be argued that you did not sell at the best possible price.
Insurance companies often rely on a formula called 17c to calculate Diminished Value. The concept appears reasonable, but the actual formula favors the insurance company rather than reflecting real-world loss of value. Collectible, classic, and exotic cars can be more greatly impacted. This is especially true for those that were in original condition with low miles.
Now that you are aware of Diminished Value, there are several sources and websites providing detailed information and guidance. Do your due diligence in researching this issue, and choose the path best suited for your situation.