Determining Your Vehicle’s Value After an Accident | Everything You Need to Know
You’re driving down the road, and suddenly you get in a car accident. Regardless of how good of a driver you are, this is something you’ll likely experience at some point as a Texan.
According to data from the Texas Department of Transportation, there’s a car accident every 67 seconds. When such an incident occurs, the first thing you’ll hope for is to survive and walk away unscathed.
However, even if the accident is minor, your car will likely have some damage. Depending on the extent of the damage, the costs may be high. Your insurance may cover the cost of repairs and restore your car to a fully functioning state. However, one thing will take a big hit, your vehicle’s value.
The good news is that you can file a diminished value claim to get compensation for the decrease in your car’s value. In this article, what diminished value is, how to calculate it, and how to go about filing a claim.
Why Does a Car Lose Value After an Accident
You’re driving down the road, and suddenly you get in a car accident. Regardless of how good of a driver you are, this is something you’ll likely experience at some point as a Texan.
According to data from the Texas Department of Transportation, there’s a car accident every 67 seconds. When such an incident occurs, the first thing you’ll hope for is to survive and walk away unscathed.
However, even if the accident is minor, your car will likely have some damage. Depending on the extent of the damage, the costs may be high. Your insurance may cover the cost of repairs and restore your car to a fully functioning state. However, one thing will take a big hit, your vehicle’s value.
The good news is that you can file a diminished value claim to get compensation for the decrease in your car’s value. In this article, what diminished value is, how to calculate it, and how to go about filing a claim.
Why Does a Car Lose Value After an Accident
While repairs may restore your vehicle to a near identic state after an accident, it will still lose value. This is because any car with an accident history will be less desirable to buyers, even if it’s been repaired.
In addition to that, your car may also lose value directly. This usually comes about when insurance companies use white-box replacements. As such, the parts used in the repair may not be the same quality as the original ones. That, combined with the fact that your car will now have an accident history, can lead to a drop in value.
How Much Value Does a Car Lose After an Accident?
Before going into how much value your car will lose after an accident, it’s important to appreciate that cars begin depreciating after purchase. For instance, the moment you drive your car out of the lot, it will lose 20% in value.
Over time it will continue depreciating depending on:
- Age: The older the car, the more it depreciates
- Mileage: High-mileage cars will also experience a decrease in value
- Aesthetics: If your car looks worn out and dull, it won’t get as good an offer from buyers
- Number of owners: The more owners a car has had, the less desirable it is
- Make and model: Different car models and makes have varying appeal and reputations on depreciation that influence demand later on
- Maintenance records: If you’ve had regular maintenance done on your car, it may have a better resale value
The value you may lose after an accident depends on various factors. However, the most common estimate is that you’ll lose 33% of your vehicle’s pre-accident value. This can be significant for luxury cars or other high-end vehicles.
Furthermore, you can expect the depreciation rate after an accident to increase by an average of 25%. This will depend on its condition before the wreck, age, and condition after the accident.
What Determines the Value of Your Vehicle After an Accident?
The amount your car will lose in value after an accident is determined by various factors.
1. The Vehicle’s Value Before the Accident
The first factor that influences your vehicle’s value after an accident is its value prior. So, your vehicle will retain much of its value unless the damage is significant.
Pre-accident values are usually determined by looking at an independent valuation guide such as the Kelley Blue Book or Edmunds. You can determine a car’s value by searching for similar cars online and checking their prices.
2. Use and History Before Accident
The amount of value your car will retain after an accident also depends on how you used it before the accident. If you regularly serviced your vehicle, kept up with maintenance and repairs, and took good care of it, you can expect a higher resale price.
On the other hand, if your car had been neglected or abused before the accident, its value will be significantly lower.
3. Type of Damage and Severity
The type and severity of the damage sustained in the accident also affect your vehicle’s value. If it only sustained minor cosmetic damage, it should not affect its resale value too much. But major structural or engine damage can significantly reduce your car’s worth.
Types of Diminished Value
There are three different types of diminished value. They each have to do with how much the cost of your vehicle decreases after an accident.
1. Inherent Diminished Value
The most frequent and agreed-upon type of diminished value post-collision is inherent. Inherent happens when a car devalues because it has a history of being in an accident, as indicated in its history reports.
With inherent diminished value, the assumption is that the repairs are top-quality. In other words, the vehicle has been restored to its pre-accident condition.
2. Immediate Diminished Value
The difference in a vehicle’s resale value immediately after an accident and before the vehicle is repaired is known as diminished value. This amount is based on what a consumer will pay for the vehicle after the accident versus before.
3. Repair-related Diminished Value
This type of diminished value is the difference in your car’s market value before and after repairs. If a repair fails, it can cause further damage or devaluation to your vehicle. If you decide to sell the car later, this can result in additional costs for you.
Car Value After an Accident
If you plan on selling your vehicle, you may feel anxious about how much it’s worth after an accident. The good thing is that you can use tried and tested methods.
1. Determine the Pre-Accident Value and Deduct 33%
As mentioned, there are several platforms you can use to get a car valuation. A good starting point is to look at independent valuation guides (Kelley Blue Book and Edmunds) and search online for similar cars and their prices.
Once you have a pre-accident value, you can deduct 33% to estimate your car’s new worth after the accident. This should give you a rough idea of what to expect when selling or trading in your vehicle.
So, if your vehicle was worth $15,000 before the accident, its value will now be:
15,000 – (33/100 x 15,000) =
15,000 – 4,950 =10,050
As you can see, your vehicle will now be worth $10,050, which is a significant drop.
2. Use the Methods Insurance Companies Use
If you’ve ever filed a claim before, you know how much insurance companies try to pay out as little as possible. And it won’t be different in this case. So, if you file a diminished value claim, you must know what to expect.
With such claims, insurance companies use the 17c method to determine the value of your vehicle. They’ll first look up its Kelly Blue Book value and then subtract 10% to determine the maximum they’ll give you as diminished value.
But that’s not all. The insurance company will deduct the vehicle’s mileage and damage further. If the damage is minor, they’ll deduct 25% and another 20% if the mileage is low.
So, from the insurance company’s perspective, your compensation will be as follows:
10/100 x 15,000 = 1,500 (10%)
This means the maximum you’ll receive for diminished value is $1,500.
1500 – 375(25%) = 1,125
1,125 – 225(20%) = 900
After all these deductions, the insurance company will only pay you $900 for your diminished value claim. Considering that from the previous calculations, your vehicle has lost $4,950 in value, there’s a big discrepancy.
Diminished Value Claims
You may have heard of diminished value claims. These are claims you can make against an at-fault driver’s insurance company if your vehicle’s value has decreased significantly due to an accident.
How Can a Diminished Value Claim Help?
If you file a diminished value claim, you can get compensated for the difference between what your car was worth before and after the accident. This difference is known as its diminished value.
If you’ve lost out on potential profits due to the accident, you can recoup some losses with a diminished value claim.
How to File a Diminished Value Claim
Filing a diminished value claim is challenging compared to other claims. This is because it’s upon you to prove that the car has diminished in value and to what degree.
So, you must understand the car’s value before the accident and its current worth. You will also have to provide evidence to prove the difference in its value.
On top of that, you must provide evidence to show how much money you would have made had the accident not happened. This could include documents related to the car’s title, insurance records, and more.
Note: Filing a diminished value claim can be complicated and best handled by an experienced lawyer. Also, if you’re the one who was at fault during the accident, you cannot file a diminished value claim.
Some of the steps you should take when filing the claim include:
- Familiarize yourself with the diminished value claim process for your insurance company.
- Use the Kelley Blue Book or NADA calculator tools to document the car’s market value.
- Provide diminished value evidence for your car. If you have photos and documents of the accident scene and damage to your vehicle, this will bolster your case. You may need a certified vehicle appraiser’s appraisal during the claims process.
- Get the insurer to approve your claim by satisfying all the conditions for diminished value claims.
Things to Consider When Filing a Diminished Value Claim
When filing a diminished value claim, there are several things you should consider.
First of all, the insurance company may deny your case if it cannot find proof that it diminished in value. So make sure to have all your evidence handy. Additionally, some insurers may not accept claims for older cars as these models depreciate faster.
Some of the factors you should consider include:
- Whether you were at fault: As mentioned earlier, you cannot file a diminished value claim if you were at fault in the accident.
- The condition of your car pre-accident: The insurance company will need to know how much the car was worth before the accident and its current condition.
- The amount of damage done to the vehicle: If there is extensive damage to your car, the insurer will likely lower its value even more.
- The age of your car: The older the car is, the harder it may be to prove its pre-accident value.
- If the other driver is uninsured: If the other driver is uninsured or underinsured, it may be difficult to get full compensation for your vehicle’s damages. The best thing to do in this situation is to reach out to your state’s uninsured motorist coverage.
Also, remember that the insurance company may only be willing to pay for some of the losses you incurred due to the accident. To better understand how much your car has diminished in value since the accident, you can use an online calculator or consult a reliable car appraiser.
Get Legal Representation
In conclusion, a car’s value can decrease drastically after an accident. The amount it loses depends on several factors, such as its use and condition before the accident, the type of damage sustained in the accident, the age of the car, and more.
If you want to file a diminished value claim, have all the required documents handy and familiarize yourself with the claim process for your insurance company. Additionally, if the other driver is uninsured or underinsured, you may need to contact your state’s uninsured motorist coverage.
Finally, if you sustain injuries or need help filing a diminished value claim, getting legal representation from an experienced lawyer can ensure you receive the compensation you’re entitled to.
In this regard, Kenny Perez Law Texas Injury Lawyers is here to help. Our attorneys understand the nuances of diminished value claims and can provide you with experienced legal counsel. For more information, don’t hesitate to get in touch with us today.
