Vehicle Damage: the Resulting Diminished Value or Depreciation of Value

When an automobile is damaged in an accident, the fact is that it now has permanently diminished value. This may also be referred to as depreciation of value.

The term ‘diminished value’ refers to the fact that when a vehicle is damaged, even just cosmetically, it’s value has been lowered. Even if the vehicle repairs are completed perfectly and the vehicle looks and operates wonderfully, it is not worth as much money as it was before it was damaged. This is because it now has an accident on its record.

Most states require that a vehicle’s full accident record be disclosed, and most buyers will turn away from a vehicle that has been in any accident. Think of the last time that you or anyone that you know thought about purchasing a previously-owned vehicle; if you knew anything about what you were doing, the first thing you said was “show me the Carfax”.

The two most common types of diminished value are:

1. Repair-related diminished value. This is the decreased value of the vehicle that is caused by incomplete, improper or poor-quality repairs.

2. Inherent diminished value. This term refers to the decreased market value of the vehicle caused by accident, whether the repairs are acceptable or not. This is the most common form of diminished or decreased vehicle value.

So what can you do if your vehicle was damaged due to the negligence of another person? Practically every state in the U.S. allows vehicle owners to pursue claims against the at-fault driver (or insurance company) for diminished value or depreciation of value. The victim must be made “whole” again. If the at-fault driver did not have insurance, and the victim has uninsured motorist coverage, then the claim may be pursued under that coverage.

The actual amount of depreciation or diminished value depends upon the specifics of the claim; factors such as the age, mileage and pre-accident condition of the vehicle, as well as the prior value and any previous accidents would be considered. The insurance company must be notified that the owner wishes to pursue a claim for diminished value. Then the insurance company will assess the value.

The vehicle owner may also consult an independent appraiser for an opinion on the loss of value. It is very simple to find such an appraiser by doing a simple on-line search or looking through the telephone book. It is not usually a good idea to ask a car dealership for a estimate on depreciation since their object is to buy vehicles at a low price and then sell high. The insurance company will not accept a car dealership’s opinion regarding depreciation for that very reason.

This article is written for informational purposes and is not intended to take the place of competent local legal counsel.

Comments for Vehicle Damage: the Resulting Diminished Value or Depreciation of Value

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Feb 24, 2012
My Small Depreciation of Value Claim was Successful
by: Lisa

We live in Maryland. My husband's Saturn was damaged in an accident with an Allstate policy holder. Repairs were done and looked good. I did not know anything about a depreciation of value claim until a co-worker asked me if I had made one. I asked the Allstate adjuster about it. He asked us if we planned on selling the car any time soon. I told him that we planned on driving the car until it died. The damage had been just cosmetic - less than a few hundred dollars.

The Allstate adjuster told us that it would cost us about $250 to get an appraisal for possible depreciation - did we just want him to give us the $250 instead? Since we have no plans to sell or trade in the vehicle unless we win the lottery (and then money won't be an issue anyway), we just took the money. We think that was fair.

If it had been our other vehicle, things would have been different, but this was just our old driving-around car.

Thank you,

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