Car Accidents and Diminished Value Claims: What You Need To Know

As soon as you drive a new car off the dealer’s lot, it loses value. Most motor vehicles depreciate over time. Unless you drive a classic car, your vehicle will continue losing value yearly. Cars also lose value after an accident. Your auto insurance company may pay for the loss in value after an accident. This is a diminished value claim.

If the other driver is liable for your accident, you can file a diminished value claim to recover the loss in your vehicle’s value. Auto insurance can depend on state laws. For more information about filing a diminished value claim after an accident, talk to a local car accident lawyer.

What Is the Diminished Value in a Car Accident?

Diminished value or diminution of value is a loss in the fair market value of a vehicle. An auto accident can also reduce the car’s value. After an accident causes property damage, the resale value will decrease because the car is less valuable to potential buyers. Depreciation is lowering the vehicle’s value based on age and mileage. 

What Factors Affect the Diminished Value of Your Vehicle?

There are different types of diminished value claims. These include: 

• Inherent diminished value claims
• Repair-related diminished value

With an inherent diminished value, the fact that the car was in an accident causes a base loss of value. People looking for a used car are wary of vehicles with an accident history. Buyers have no idea whether a prior accident caused minor damage or major damage.

A repair-related diminished value claim is based on a change from the original condition. For older vehicles, finding original (OEM) parts may be harder, so a repair shop may have to rely on aftermarket parts.

How Do You Calculate the Diminished Value of the Vehicle?

Insurance companies often use a 17c formula to calculate diminished value. This formula starts with the vehicle’s value before the accident. The valuation may come from the Kelley Blue Book or the National Automobile Dealer Association (NADA). 

If an accident causes severe structural damage, it may not be worth repairing the vehicle. The repair costs may exceed the car’s market value. The maximum amount the insurance company will cover is 10% of the base value. 

Then, you use a damage multiplier based on the structural damage. Severe structural damage is a 1.0 multiplier, and no structural damage is a 0.0 multiplier. There is also a mileage multiplier from 1.0 to 0.0 based on mileage.

For example, if your vehicle was worth $40,000 before the accident, the insurance company will only cover up to 10% or $4,000 in base value loss. A moderate structural damage value multiplier of 0.5 will lower the claim to $2,000. If the car has 50,000 miles, the multiplier is 0.6, making the final amount of your claim $1,200.

Insurance companies may use different formulas to calculate diminished value. The 17c formula is one common method, but practices can vary from case to case. Consult with your lawyer if you have questions about how your car’s value is determined.

How Do You File a Diminished Value Claim?

A diminished value claim is a motor vehicle insurance claim to recover the financial loss of value. You can file a diminished value claim against the at-fault driver’s insurance company. This makes the other driver financially responsible for the diminished value of your car.

Unfortunately, the other driver’s car insurance company may not respond to your claim. You may have to take legal action to recover your vehicle’s lost value. Your auto accident attorney can deal with the insurance company to make sure you get a payout for your vehicle’s market value loss.  

How Can a Car Accident Attorney Help With a Diminished Value Claim?

A personal injury attorney can help with your diminished value claim after an accident. Your attorney can deal with the other driver’s insurance company to get you the maximum compensation. If you suffered injuries in an accident, your attorney can also help you get money for medical bills, lost income, and pain and suffering.  There is a limited amount of time to file an injury accident claim. The statute of limitations puts a time limit on your ability to recover compensation.

Talk to a local car accident attorney as soon as possible after an accident to protect your legal rights.