Diminished Value Calculator
Has your vehicle lost value as a result of your accident? Use this tool to help you decide what to do.
Your car immediately loses value after you are involved in a wreck and your vehicle is damaged. This loss in value may have a negative effect when you attempt to sell or trade-in your vehicle. When your vehicle has been damaged by the fault of another driver, if the vehicle is able to be repaired, the at-fault driver’s insurance may be liable for both the cost of repairs and the value lost in the accident, also known as the diminished value.
Diminished value is essentially the depreciation amount of your vehicle after it has been involved in a wreck. You may be entitled to receive the difference between the fair market value (FMV) of your vehicle before your accident and the depreciated value after the accident and repairs.
For example, let’s assume that your vehicle was worth $15,000 before the accident took place. After being in the accident and having your vehicle repaired, however, your vehicle is now worth only $10,000. The insurance company of the at-fault driver may be responsible for reimbursing you the $5,000 that your vehicle has depreciated in value, which is known as its diminished value.
Diminished value is important because, once repaired, your vehicle has negative vehicle history that will likely show up on the title or the Carfax report. This is referred to as inherent diminished value. In other words, buyers in North Carolina are likely less willing to pay for a vehicle that has been significantly damaged in a prior accident. As such, you should be entitled to claim that “lost worth” from the at-fault driver’s insurance company.
The fair market value (FMV) is the amount that a seller and buyer agree upon for a vehicle’s worth. Determining the fair market value is not an exact science and can be a somewhat tedious task, as the value is always disputable. With that being said, it is highly recommended that you receive an appraisal from a disinterested professional and licensed third party. Having a third party appraise the fair market value of your vehicle will help eliminate bias and provide you with more leverage during negotiations with the insurance adjuster. Also, be sure that you get all appraisals in writing to better support your claim.
An appraiser will consider numerous factors when determining the FMV of your vehicle. An appraiser generally considers such factors as: the age of your vehicle, the make and model of your car, location and severity of damage to your vehicle, the cost of repairs and the quality of repairs done to your vehicle. Appraisers and the companies for which they work maintain records of car sales in your area for comparable vehicles that have not been damaged in an accident. Furthermore, they have expertise in evaluating cosmetic and mechanical effects after your vehicle has been damaged. Taking all this into consideration, the appraiser will be able to compare the value of your vehicle after the accident and the fair market value of your vehicle just before the accident to determine the diminished value. This information will be vital in negotiating your diminished value claim.
While hiring an appraiser can be helpful to your claim, their services are often expensive. With that being said, there are several different actions that you can take on your own. Due to diminished value claims being based on the fair market value of your vehicle, you will need to find sale prices on cars that are comparable to yours, but without an accident history. This can be done by looking on sites like Auto Trader and at local car dealerships. Also, you can have your vehicle evaluated at car dealerships for trade-in values once your repairs are complete. Some dealerships may be willing to provide you with an estimate for your vehicle’s value if it had not been in an accident. This can be helpful, as it provides you with the general fair market value of your vehicle before the accident occurred.
Important Note: Remember that trade-in values are generally much less than private and sale values, as the dealership will be looking to make a profit upon reselling the vehicle.
Once you have determined your diminished value estimate, send a demand letter (LINK) to the insurance company. Include your name, claim number and contact information. More importantly, the letter should explain the current diminished value of your car compared to its fair market value just before the accident took place. This letter does not have to be complicated. In your demand letter, be sure to request compensation in the amount of the difference between the two values. Clearly state that the diminished value was directly caused by the negligence of their insured driver, and therefore you are entitled to reimbursement. If you have received a valuation from an appraiser, include that with your demand letter as evidence to support your diminished value claim.
Once you have sent the demand letter, the insurance adjuster may contact you with their initial offer. Ask for a breakdown or itemization of how the adjuster determined their diminished value offer. Further, ask the adjuster to justify their reasoning if they offer you a lower amount than you believe is reasonable in light of your valuation. If you did not receive a rental vehicle while your car was being repaired, you may be able to use that fact as a bargaining chip to try to increase the adjuster’s offer.
If you and the insurance adjuster cannot reach an agreement, there are several different steps you can take. Pursuant to North Carolina General Statute § 20-279.21, you are entitled to invoke what is known as the appraisal clause. Essentially, by invoking this clause, both you and the insurance company will be required to hire disinterested third-party appraisers who will then try to reach an agreement on the diminished value of your vehicle. If the two appraisers are able to reach an agreement, then both you and the insurance company have 15 days to object. If no objections are made within the 15-day timeframe, the agreement becomes binding. For more information on invoking the appraisal clause, please read our article on the topic.
If you are unable to reach an agreement through invoking the appraisal clause or decide to forgo invoking the clause, you may consider filing a claim against the at-fault driver and their insurance company. In other words, you may file a lawsuit for your diminished value claim. Generally, these claims will be brought in small claims court as they usually will not exceed $10,000. However, if your diminished value is greater than $5,000, you may want to consider speaking with an experienced diminished value or personal injury lawyer in your jurisdiction.