What is Diminished Value?

What is Diminished Value? 

You might be surprised to learn that after your car has been in an accident, even if it is fully repaired by a certified body shop, its value will still be less than that of a vehicle that has never been in an accident. This difference in value is called the ‘diminished value’. This amount should be accounted for and paid out by the insurance company, though many insurance companies are not forthcoming with this information. Diminished value claims usually require you, the owner of the vehicle, to get an appraisal to determine the exact loss. This amount could be significant, into the thousands of dollars.  

Types of Diminished Value Assessments

The diminished value of a car is the reduction in the vehicle's market value after it has been damaged in an accident and subsequently repaired. In insurance claims, it represents the loss in value that isn't necessarily rectified by repairs. Here are some different types of assessments that may be used to determine your vehicle’s diminished value:

1. Immediate Diminution in Value: The difference in the market value of the vehicle immediately before and immediately after an accident. This method is straightforward but requires accurate assessment of the car's value before the accident and right after, before any repairs. Hiring a certified independent appraiser will be in your best interest in most cases, especially if your car is a classic, has customizations and/or upgrades, is considered a luxury vehicle, or is rare. 
2. Inherent Diminished Value: The most common type of diminished value. It refers to the loss in value of your car due to the mere fact that it has a history of damage. This loss persists even after full repairs have been made. Typically, this is calculated by assessing the car’s value if it were undamaged and subtracting the value post-repair.
3. Repair-Related Diminished Value: This refers to the diminished value caused by less-than-perfect repairs. For instance, if the color match is slightly off or aftermarket parts were used instead of original equipment manufacturer (OEM) parts, the vehicle might lose value. 
4. Formula-Based Assessment: Some insurers and courts use specific formulas to estimate diminished value. One of the more famous formulas is the "17c Formula," originally used by State Farm. It starts with the vehicle’s value and adjusts it based on damage severity and mileage. 

Keep in mind that, unless you have a stated value insurance policy, most insurance companies are basing your car’s value on the Kelley Blue Book or NADA value, which only accounts for standard equipment, and not any aftermarket mods or customizations. In older cars, such as classics, there may not be enough data for NADA to estimate your car’s value. However, an experienced, independent car appraiser can, and will use similar comparable vehicle sales to document your car's actual value, while taking into account the expected depreciation and general condition of the car. An appraiser will prove your car's diminished value because of the accident, which is an amount above and beyond its depreciation. 

How The Diminished Value Is Determined

1. Assessment of Pre-Accident Value: Your appraiser begins the process by determining your vehicle's market value just before the accident. Factors such as make, model, year, mileage, features, and overall condition are taken into account. Different automotive databases will be utilized for this purpose.
2. Review of Repair Documents: Your appraiser examines all repair documentation to understand the extent of the damage and the quality of the repairs done. This includes looking at parts invoices, labor records, and photographs of the damage.
3. Inspection of the Vehicle: Your appraiser physically inspects your vehicle to assess its current condition, as well as the quality of repairs. This might include checking for visual discrepancies, the functionality of repaired components, and any signs of underlying damage that wasn’t properly addressed.
4. Market Research: Your appraiser conducts market research to compare the vehicle’s value with similar models that have not been involved in accidents. This step might involve gathering data on sales of comparable vehicles in the same geographic area. In cases of classic and custom cars, luxury, high-end or rare cars, using an experienced appraiser to assess your car will be invaluable.  
5. Calculation of Diminished Value: Using the gathered information, your appraiser calculates the diminished value. This can be done using a formula (like the 17c formula) or based on a percentage loss typical for vehicles with similar damage history. Sometimes, professional judgment based on experience is needed when there are no recent comparable cars. 
6. Preparation of a Report: The final step is to compile an appraisal report, which includes your appraiser’s findings, methodology, and the calculated diminished value. This report can be used for insurance claims or legal proceedings to support the claim for diminished value compensation. 

Auto Appraisal Network of Charlotte is an independent appraiser specializing in appraisals for classic and custom cars, trucks, and motorcycles, as well as late model vehicles, including luxury cars, for insurance claims, insurance policies, legal purposes and financial needs. Our appraisals are certified and accurately document your vehicle’s value using color photos and a detailed assessment in a comprehensive report accepted by insurance companies, financial institutions and the legal system.  

If you are in Charlotte, NC or any of the surrounding areas, have recently been involved in a car accident and feel that the amount of money offered to you by the insurance company isn’t accurate, give us a call. We’ll let you know if we think having an appraisal done will be worth it. In many cases, our clients have gotten thousands more for their car after having an appraisal done by Auto Appraisal Network. 

In addition to diminished value appraisals, we do pre-purchase inspections, appraisals for financing, bankruptcy, estates, and for insurance purposes. We offer same-day or next-day services, depending on your location. Call us at (704) 703-4801 to schedule your appraisal today.

Auto Appraisal Network of Charlotte specializes in appraisals for classic, custom and collector vehicles, including cars, trucks, SUV's, motorcycles, boats and personal watercraft.  We do appraisals for insurance policies and claims, such as diminished value and total loss, probate, bankruptcy, divorce, financing, fair market value and pre-purchase inspections. 

Our appraisals are certified and accepted by the legal system, insurance companies and financial institutions. When you need an accurate, fair assessment of the value of your ride, you need Auto Appraisal Network of Charlotte. Call (704) 703-4801 to schedule your appraisal today.