How to Calculate Diminished Value After a Car Accident
When you purchase a car, it’s an investment that naturally depreciates over time due to wear and tear. But there’s one circumstance that can significantly speed up this process: being involved in a car accident. Even after repairs have been completed and your vehicle appears as good as new again, its value has likely dropped simply because it’s now classified as an accident-damaged car on record.
This dip in market price is referred to as “diminished value,” putting drivers at an economic disadvantage through no fault of their own when they decide to sell or trade their automobile post-accident.
Although it may sound similar to depreciation, diminished value is distinct from this naturally occurring process of reduction over time due to wear and tear or obsolescence. Even beautifully restored or maintained vehicles can suffer from a substantial drop after an accident because of consumer perception towards previously damaged vehicles.
Types of Diminished Value
Diminished value claims can take several forms. The specific type of claim you’ll file will depend on the unique circumstances around your accident.
Inherent Diminished Value: This represents the automatic loss in market value a vehicle suffers simply because it has been involved in an accident. The calculations for this type of loss are not based on actual repairs, but rather the fact that there is now a history of damage associated with the car itself.
Immediate Diminished Value: This is essentially the difference between your car’s worth pre-accident and its depreciated value immediately after an accident and before any repairs have been done.
Repair-Related Diminished Value: This refers to the decrease in a vehicle’s value due to substandard or inadequate repairs after an accident. It may happen when non-OEM (Original Equipment Manufacturer) parts are used, cheaper methods are applied for repairing, or certain damages are not repaired at all. The quality and type of repair work done on the vehicle can negatively impact its overall market value.
Calculating Diminished Value
When calculating a diminished value claim, there are several steps that must be taken:
- Estimate Pre-Accident Worth: The initial step in calculating diminished value using the common State Farm’s 17c formula involves finding the worth of your vehicle before the accident took place. This can be determined through reputable resources such as NADA or Kelley Blue Book.
- Apply Base Loss Value Cap: Next, apply the base loss cap – which stands at a maximum of 10%. This means that regardless of what damages might occur in an accident, it’s assumed that a post-collision vehicle could lose a maximum of 10% of its pre-accident sales value.
For example, if your vehicle was worth $15,000 prior to an accident according to NADA/Kelley Blue book estimations, then there’s a maximum potential diminished value of $1,500.
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Apply Damage Multiplier: The next step involves applying a damage multiplier that corresponds to the extent of your vehicle’s structural damage following an accident. This ranges from 0.00 (indicating no structural damage) to 1.00 (severe structural impairment). For instance, if you have moderate damages, you could use a value of 0.50 as your specific multiplier.
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Use Mileage Multiplier: Depending on your car’s mileage at the time of the accident, a second multiplier is applied. This factor can vary from 0.00 (for vehicles with over 100,000 miles) up to 1.00 (for those between 0 – 19,999 miles). This scale aims for an equitable calculation based on the premise that higher mileage cars tend to have lower market values even before any accidents occur because of wear and tear factors.
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Calculation of Diminished Value: The final step to determine the diminished value amount is to multiply the base loss of value by both multipliers. So, if your base loss was $1,500, and you had a damage multiplier of 0.50 and a mileage multiplier of 0.60 (assuming your car has between 40k-60k miles), then the calculation would be $1,500 x 0.50 = $750. Next multiply it by the mileage one: $750 x 0.60 = $450, which becomes the final diminished value amount that could possibly be received from an insurance company.
Remember though, this calculation just provides rough guidance, as actual numbers can change depending on various factors, including your attorney’s ability to negotiate.
Evidence Used in Diminished Value Claims
Thorough documentation can significantly bolster your diminished value claim; you will need every piece of data and information available to construct the strongest possible claim. Here’s how each piece of evidence plays its part:
Photos: Photos of before and after the accident should be provided. Before pictures highlight the initial condition of your vehicle, while after photos accurately depict damages incurred due to an accident. This tangible proof clearly demonstrates how significantly the incident impacted your vehicle.
Repair Invoices: Offer concrete details on exactly what fixes were executed, how much they cost, and whether OEM or aftermarket parts were used – a crucial component in calculating the reduced market value after an accident.
Objective Third-Party Reports: If you obtain professional assessments from mechanics or dealerships who did not carry out repair work on your vehicle, these offer unbiased views about potential valuation loss due to repairs.
Appraisals: This documentation illustrates the decrease in resale value directly attributable to being labeled as a car in an accident, regardless of the quality of repair work completed.
Compiling all of these elements into one comprehensive package builds a strong foundation for you to get the compensation you’re entitled to.
Negotiating With Insurance Companies
While it’s possible to negotiate a diminished value claim on your own, many people choose to hire an attorney for several compelling reasons.
Insurance companies have vast experience in dealing with such claims. They may employ tactics meant to minimize payout or dismiss your claim entirely. With legal counsel by your side, however, you’ll be armed with professional knowledge that can handle deceptive strategies and press harder for a fair settlement. Lawyers know the ins and outs of property damage claims, which puts them in a better position to negotiate with insurance companies on your behalf.
If you need help with a diminished value claim, our Charleston car accident lawyers are here for you. Contact us today to schedule a free consultation.
