If you ever plan to resell your car, you naturally keep track of its value. Cars could sometimes lose significant value if an accident occurs and your vehicle is repaired. This is what’s known as a car’s diminished value. So when an accident or damage occurs, you’ll want your vehicle to be insured for all its value, which it could lose if you plan to sell it later.
If you plan to sell your car, potential buyers will need to know about such damages if it isn’t in its original condition. A diminished value claim is filed similarly to a standard car insurance claim. However, there are some essential requirements to ensure your car is insured for all its value.
What is Diminished Value?
Diminished value is the total difference, or value drop, of your car before and after an accident or collision from its fair market value. There are a couple of different ways such damages can decrease the value of your vehicle, so they are broken up into three different types of diminished value.
Types of Diminished Value Claims
Three categories of diminished value claims exist: immediate, inherent, and repair-related. Each category represents a specific manner by which the value of a vehicle has been reduced.
Inherent Diminished Value
The inherent diminished value of a car is best described as the total diminished value of the car, accounting for accident history, damages, and repairs done over the years. A history of damage and repairs can quickly reduce the value of any given vehicle. This assumes that all the car’s repairs were done correctly and that it continues to function as usual.
Immediate Diminished Value
This type of diminished value reflects the immediate damages of an accident that has just occurred. However, because your car is typically repaired right after an accident, immediate diminished value doesn’t appear on diminished value claims. The repair cost is not reflected in a diminished value claim for the at-fault driver or party.
Repair-Related Diminished Value
Based on the repairs after an accident, this type of diminished value will reflect the difference after such repairs are done. This is especially the case for low-quality repairs. Some examples of this include the repair shops using different paints or parts to repair the damage; these will naturally affect the overall value of your car. It’s always important to consider the caliber of repairs and how they will likely impact your car’s fair market value.
How is Diminished Value Calculated?
Calculating the diminished value of your car is a manner of looking in the right places and plugging in values in simple 4th-grade level equations. This is known as the 17c diminished value formula –the 17c refers to the State Farms claims case it originated in. Here is everything you will need to know about the calculation and formula.
Find The Value of Your Car
NADA and The Kelley Blue Book are the foremost resources for any given car’s market value. Their websites also offer personal calculators to help you perform more specific appraisals regarding your particular make and model. Your car’s mileage must also be provided to find the specific value.
Apply a 10% Cap
A general rule of thumb and practice of obtaining the value of a car is to apply a 10% cap on every value, as insurance companies will do this as a standard. This accounts for what is known as the “base loss value” that every car experiences upon being driven off a lot. The cap is the maximum amount your car insurance company will pay when you file a claim.
Add a Damage Multiplier
Within the formula, the 10% cap is multiplied by anything from 0.00 to 1.00 based on the damage the car has received in the past or at the moment. The values and their corresponding damages are listed below:
- 0.00 - No damage at all
- 0.25 - Minor damage on car body and panels
- 0.50 - Moderate damage on car body and panels
- 0.75 - Major damage on car body and panels
- 1.00 - Total and severe damage
Add a Mileage Multiplier
After doing the damage above multiplier, you will need to add the mileage multiplier, which works the same, with values from 0.00 to 1.00 indicating how much mileage the car in question has and how it will affect its value. Here are those amounts:
- 1.00 - 0 to 19,999 miles
- 0.80 - 20,000 to 29,999 miles
- 0.70 - 30,000 to 39,999 miles
- 0.60 - 40,000 to 59,999 miles
- 0.40 - 60,000 to 79,999 miles
- 0.20 - 80,000 to 99,999 miles
- 1.00 - 100,000 miles and over
Calculating Your Car Total Diminished Value
Breaking up the diminished value formula into three easy multiplication problems is easy. Suppose you have a car worth $20,000 with moderate damage and about 20,000 miles on the odometer. What would be the diminished value? Here’s how you can find out.
- 20,000 (car value) *.10 (10% cap) = 2,000
- 2,000 * .50 (moderate damage) = 1,000
- 1,000 * .80 (20,000 miles) = 800
- 2,000 + 1,000 + 800 = $3,800 (total diminished value of your car)
How to File a Diminished Value Claim
The biggest catch about filing a diminished value claim with your car insurance company or another is that if you are at fault for the accident and damages, it will most likely be rejected. You will also be responsible for proving your car’s diminished value while filing the claim.
To do this, you must have documentation from sources like The Kelley Blue Book that proves your car’s value. Going to an appraiser to look at your vehicle and the documentation they provide is one of the most important and practical things you can do when filing a diminished value claim. Every state has different regulations on how insurance companies and accident victims are supposed to handle these types of claims.
If you are in an accident with an uninsured driver, then it significantly helps to file a diminished value claim. It’s also best to begin the claim filing process because your car may diminish in value with each passing moment after an auto accident.
Suppose you have the documentation for a diminished value claim. In that case, you should be able to file with the at-fault driver’s insurance provider. If the at-fault driver doesn’t have coverage, uninsured motorist coverage will be handy.
Because of the complexity of diminished value claims, they take a little longer than standard car insurance claims by weeks or sometimes months. This is another reason why getting on the claims process as soon as possible is especially important when it comes to diminished value and property damage claims. If you need help determining your car’s value, you can always take it to a licensed appraiser.
