Were you involved in a car accident recently? If so, you probably have a million and one questions swirling around inside your head right now. From “Who are the cops going to say was responsible for the crash?” to “Is my auto insurance company going to increase my rates?”, you’re going to find yourself stressed out beyond belief.
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One of the biggest questions you’re going to be left asking is “How much is my car worth now that it’s been in an accident?” This can be a difficult question to answer. But by using a diminished value calculator, you should be able to determine how much your car is worth in the aftermath of an accident.
That being said, it can be hard to understand the concept of diminished value and the role that it plays in your car’s value following a crash. You should take the time to get a better grasp on it so that you’re not surprised to learn how much your car has gone down in value later. Learn more about diminished value and see how a diminished value calculator works below.
What Is Diminished Value?
Using a diminished value calculator to figure out how much a vehicle is worth can be complicated. But it’s not all that hard to comprehend what diminished value is and how it can affect a vehicle.
Diminished value—or “diminution of value” as it’s sometimes called—is the difference between what a vehicle is worth before it was involved in an accident versus what it’s worth after an accident has occurred. As you might imagine, diminished value is something that’s very important to a person who owns a vehicle that’s been involved in a car crash.
It’s worth nothing that diminished value is not the same thing as depreciation. Unlike diminished value, depreciation refers to how much value a vehicle loses over time. It doesn’t have anything to do with whether or not a vehicle has ever been involved in a car accident.
The Different Types of Diminished Value
Now that you know what diminished value is, you should know that there are several different types of diminished value. You should familiarize yourself with each one and figure out which type of diminished value is affecting your vehicle at the moment.
Here are the three main types of diminished value and a little bit more information about each of them:
- Inherent Diminished Value: When you hear people talking about diminished value, they’re more often than not talking about this type of diminished value. It’s the most common type of diminished value, and it refers to the value that a vehicle loses as a result of its damage history once it has been repaired. When it comes to inherent diminished value, it’s assumed that the necessary repairs have been made to a vehicle after an accident and that those repairs were made properly before a vehicle was put back out onto the road.
- Immediate Diminished Value: Unlike inherent diminished value, immediate diminished value is a diminished value that’s calculated right after an accident has taken place. As its name would suggest, it refers to the difference between what a vehicle was worth prior to an accident versus what it’s worth prior to it having the necessary repairs made to it. This is probably the least common type of diminished value since most vehicle owners and auto insurance companies don’t calculate diminished value until after repairs have been made to a vehicle damaged during an accident.
- Repair-Related Diminished Value: If you’re trying to calculate the repair-related diminished value of your vehicle following an accident, it’s usually because shoddy work was done to your vehicle during the repair process. This type of diminished value is utilized when aftermarket parts are used while repairing damage done to a car or when a damaged car is painted a slightly different color than it used to be before getting into an accident. It refers to the difference between what a car was worth prior to an accident and what it’s worth after having low-quality repairs performed on it.
Why Does Diminished Value Exist?
There are some people who are under the impression that diminished value won’t have an impact on their vehicle as long as they take the time to do the proper repairs to it after an accident. But this is, unfortunately, not true. Even if you spend a small fortune repairing your vehicle and make it look like new again, it’s still going to be subjected to diminished value.
Why? The reason is simple. No matter how diligent you are about repairing a vehicle following an accident, it’s impossible to erase the accident completely. There is always going to be a chance that the vehicle could be perceived as a safety risk after people see an accident on your vehicle history report, regardless of what repairs were done to your car. There is also a good chance that the repairs that were made could impact any warranties that were on your vehicle or any recalls that are put out for it.
All of these things help to explain why diminished value exists in the first place. Diminished value is a tool that’s used to let others know about the potential risks that they might be taking on by purchasing your vehicle at a later date.
How to Use a Diminished Value Calculator
At this point, you should hopefully have your head wrapped around what diminished value is and why it’s important to know where the diminished value for your post-accident vehicle stands. Now comes the tricky part: Wrapping your head around how to go about using a diminished value calculator to come up with your actual diminished value.
A diminished value calculator relies on a complex formula called 17c that auto insurance companies use to calculate diminished value. It was first used during a court case in Georgia involving State Farm, and it has been used as part of the diminished value calculator ever since.
There are four steps that auto insurance companies will follow when using the 17c formula as part of their diminished value calculator. This is how they’ll go about calculating your vehicle’s diminished value following an accident:
- Step 1: Figuring out your car’s value. The first thing an auto insurance company will do when crunching the numbers to determine your vehicle’s diminished value is figure out how much it would be worth if it hadn’t been involved in an accident. They’ll often use the National Automobile Dealers Association’s (NADA) website to find the value for it. The value is based on key factors like your vehicle’s year, condition, make and model, mileage, engine, color, and more.
- Step 2: Applying a 10% cap. When an auto insurance company is trying to determine your vehicle’s diminished value, they’ll assume that it hasn’t depreciated by any more than 10%. They will, therefore, apply a 10% cap right from the start.
- Step 3: Applying a damage multiplier. After applying a 10% cap to your diminished value, your auto insurance company will inspect the damage that’s been done to your car during an accident and make a note of how severe the damage was. They will then assign a number from zero to one based on how much damage they see and multiply the number that they come up with by 10%.
- 00 = Severe structural damage
- 75 = Major damage to structure and panels
- 50 = Moderate damage to structure and panels
- 25 = Minor damage to structure and panels
- 00 = No structural damage or replaced panels
- Step 4: Applying a mileage multiplier. Outside of evaluating the damage done to your car during an accident, your auto insurance company will also adjust your diminished value based on the number of miles you have on your car. They’ll look at where your car falls on the mileage chart below and multiply its corresponding number by the adjusted value of your car.
- 0 = 0–19,999 miles
- 8 = 20,000–39,999 miles
- 6 = 40,000–59,999 miles
- 4 = 60,000–79,999 miles
- 2 = 80,000–99.999 miles
- 0 = 100,000+
Once your auto insurance company has run the appropriate numbers through this calculator, they’re able to provide you with the diminished value of your vehicle in the end.
Ways Diminished Value Can Impact You
It’s very important for you to know what the diminished value of your vehicle is following an accident because it can impact you in a number of different ways. The diminished value of your vehicle can determine:
- How much you might be able to receive by filing a diminished value insurance claim
- Whether or not you might be able to refinance your vehicle at some point in time
- What you should expect for people to offer you for your car if you ever try to sell it
There is a chance that you might not be happy with what the diminished value of your vehicle is after an accident. You might even go as far as trying to dispute the diminished value of your vehicle if you don’t agree with it. But whatever you do, you shouldn’t bypass the opportunity to figure out where your diminished value stands since it could have such a big impact on you down the line.
What Should You Do With a Vehicle With Diminished Value?
If you own a vehicle that was involved in an accident and that now has a diminished value, you might be wondering what in the world you should do with it. There are several options that you will have once your diminished value has been determined.
You can take a vehicle with diminished value and:
- Consider filing a diminished value insurance claim with the insurance company of the at-fault driver involved in your accident (assuming, of course, that that driver is not you)
- Continue driving your car around once the necessary repairs have been made to it and it’s safe to drive
- Take your car and sell it to someone who doesn’t mind purchasing a vehicle that’s been involved in an accident and that now has diminished value
How to File a Diminished Value Insurance Claim
Most of the auto insurance companies out there have policies in place that prevent vehicle owners from filing diminished value claims against their own insurance companies. However, there are some states in which you might be permitted to file a diminished value claim against another driver’s auto insurance company if they were at fault for the accident you were involved in.
At the present time, these are the states that allow vehicle owners to file these types of claims in an effort to recover the diminished value of their vehicle:
- Arizona
- Colorado
- Florida
- Georgia
- Illinois
- Indiana
- Iowa
- Kansas
- Louisiana
- Maryland
- New Mexico
- New York
- Oregon
- South Carolina
- Virginia
If you live in one of these states and want to file a diminished value claim against the auto insurance company that an at-fault driver uses, you’ll need to reach out to that insurance company directly and follow the proper procedures. Each insurance company has a slightly different process for how they go about processing diminished value claims. You may also need to take an auto insurance company to court if they refuse to do anything about your diminished value claim.
How Understanding Diminished Value Can Help You
The last thing you want to do is go to sell a car that’s been involved in an accident one day and learn that it’s worth a whole lot less than you imagined. But that’s precisely what’s going to happen if you don’t know what the diminished value of your car is.
It’s why it’s so important for you to work with your auto insurance company to figure out the diminished value of your car. They can use a diminished value calculator to provide you with the diminished value of your vehicle so that it doesn’t catch you off guard later.
In some cases, the diminished value might motivate you to file a diminished value insurance claim. But if nothing else, it’ll let you know about how much you’re going to be able to sell your car for if you decide to part ways with it one day.
If you ultimately decide that you would like to sell your car following an accident without having to worry about the diminished value of it, Cash Cars Buyer can help you. We can provide you with a great offer for your car, regardless of the diminished value of it and regardless of any accidents that it may have been involved in over the years.
Give us a call today to see how easy it is to unload a car that you don’t want anymore for cash.