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Car Values – Diminished Value After an Accident

4:35 pm Public Service
Crashed_Car
© DenLorsTools.com Summary: Everyone knows that car accidents can affect value, just how much is the question. How much value does a car lose after an accident? Even if it is repaired? It’s called diminished value.
This article was inspired by a friend that had a car which was rear-ended when it was only 6 months old and they knew it lost value. Even after it was repaired they knew it was worth less. They were just not sure how much less. See the example provided for more insight.

What exactly is diminished value (definition)?

Diminished value is the difference in a vehicle’s market value after it has been in a car accident and repaired. Most people are not willing to pay full price for a vehicle that has been in an accident. Especially if the accident was severe. Most people are unaware that insurance companies (not only pay for car repairs) they may also pay the diminished value difference. Even if the mechanical repairs, body work and paint work have been completed flawlessly, the vehicle may still lose value. Some companies even specialize in determining diminished values for car owners at the request of insurance companies. If the insurance company is notified that you expect to collect diminished value after an accident, they typically require a diminished value report. The report is made by an unbiased third party appraiser to establish the loss in value.

Some insurance companies use a formula called 17c to determine diminished value, this formula may not accurately reflect the most current market value.

Insurance companies don’t want you to know.

Car insurance companies have every reason to deny that there is any loss in value, or diminished value. In some cases there could be minimal value difference in others the difference could be huge. Some other things that should be considered are:

1. Quality of repair. Is it obvious that the vehicle was in an accident? Paint lines, paint color shade difference, over-spray, body panels even etc.

2. OE parts used? Many aftermarket parts are high quality, some are not. They could affect appearance, durability and of course value.

3. Vehicle under factory warranty? Will the fact that the car was in an accident affect any of the warranty coverage?

Understanding Diminished Value – Example

A six month old vehicle is worth $25,000. It’s involved in an accident causing $10,000 in damage. Your insurance company pays for the repairs.

The body shop did an excellent job and the vehicle looks like it’s in showroom condition. The newly repaired car is still worth, $25,000 right? Wait, not so quick. For starters, CARFAX which is used by car dealers and potential car buyers everywhere for checking a vehicle’s history, shows the accident has occurred. Many car dealers cannot sell this car as a “certified” used vehicle, which greatly reduces it’s value. Even individuals that access a CARFAX report are more likely to look elsewhere, unless they can purchase at a reduced price. Let’s say the individual is willing to pay $20,000 for the damaged goods. The diminished value difference would be $5,000.

Conclusion: Check the insurance policy closely. Weigh in the age factor of the vehicle and severity of the accident. And finally consider having an expert diminished value report conducted.

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2 Responses
  1. frank :

    Date: February 10, 2011 @ 8:58 pm

    I purchased a 2009 Cadillac Escalade. One wek later paint started to chant bodyshop said car was painted front bumper right front fender right door how much diminished value would you estimate? Purchase price 52,000

  2. dennisb - Auto Tool Sales :

    Date: February 12, 2011 @ 2:52 pm

    Frank, there are companies that specialize in calculating diminished values after an accident. There are many factors involved. Sometimes the automatically generated adds on this site run advertisements. If you don’t see a related one just search on Google for a Diminished Value Company. Good Luck

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