Cash News
Diminished value is the difference in a vehicle’s worth before an accident versus after repairs are completed. A diminished value claim is a request to an insurer to receive compensation for that value loss.
After an accident, you may focus on getting your car repaired as quickly as possible. But the importance of your car’s change in value will become evident when it’s time to sell. After all, if you’re a potential buyer comparing two identical cars available for the same price, would you pick the one that’s been wrecked or the one that’s accident-free?
Your car’s diminished value is an outcome of the accident, not unlike property damage and bodily injury. Depending on where you live and who caused the accident, you may have the option to file a diminished value claim to regain some of the value your vehicle lost following the accident.
Learn more: What to do after a car accident: Your step-by-step guide
Diminished value claims are most often handled by the at-fault insurance provider. An approved diminished value claim pays you cash as compensation for your car’s reduced market value.
Follow these five steps to file a diminished value claim:
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Contact the at-fault driver’s insurance. First, you’ll work with the at-fault insurance company to repair your vehicle after the accident. This involves filing a car insurance claim promptly, complying with all requests from the insurance company’s adjuster, and meeting any deadlines for documentation and information.
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Research your car’s value before the accident. Kelley Blue Book (KBB), NADA, and Edmunds are popular car-value resources. Collect at least two private-party value estimates for your vehicle, assuming the accident didn’t happen.
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Calculate the diminished value with the 17c formula. As we’ll explain more below, the 17c formula is a standard, accepted formula for calculating a vehicle’s value loss after an accident. You can also optionally get an appraisal. An appraisal will be useful if the insurer does not agree with your diminished value calculations.
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Contact the at-fault insurer and ask to file a third-party claim. A third-party claim is filed by someone who is not insured by that carrier.
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Present your information and negotiate. Your claim amount is the change in your car’s value pre-accident versus post-accident. Submit all information you have gathered to support that amount. This should include your calculations and valuations or appraisals. The insurer will review and respond.
Learn more: What is the actual cash value of my car? Here’s what to know.
If you’re unsure whether you should file a diminished value claim, you will be better positioned for a successful outcome when all of the following are true:
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Your vehicle was less than 10 years old, with reasonable mileage, and in good condition prior to the accident.
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You did not sign a liability release that applies to the accident.
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Your vehicle suffered major damage in the accident.
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The insurance company did not declare your car a total loss.
Also, states set statutes of limitations on filing diminished value claims. They are commonly between two and six years from the accident date.
The 17c formula quantifies value loss by applying two multipliers to 10% of your car’s pre-accident value. The first multiplier accounts for the damage level, and the second adjusts for the number of miles on your vehicle.
Step 1: Calculate 10% of your car’s value. The 17c formula begins by finding 10% of your car’s value. Simply multiply 0.1 by the car’s market value (found at KBB or NADA). This is the maximum value loss insurers will consider in diminished value claims. If your car is worth $35,000, 10% is $3,500.
Step 2: Adjust with the damage multiplier. Use the table below to select a damage multiplier value. These only consider structural damage, not mechanical or cosmetic damage.
|
Multiplier |
Damage Level |
|
1.00 |
Severe structural damage |
|
0.75 |
Major damage to structure and panels |
|
0.50 |
Moderate damage to structure and panels |
|
0.25 |
Minor damage to structure and panels |
|
0.00 |
No structural damage or replaced |
If your $35,000 car sustained major damage in the accident, you would apply the 0.75 multiplier to $3,500. The result is $2,625.
Step 3: Adjust with a mileage multiplier. Next, you will adjust for the vehicle’s mileage. The table below lists the mileage multipliers.
|
Multiplier |
Mileage Range |
|
1.00 |
0-19,999 miles |
|
0.80 |
20,000-39,999 miles |
|
0.60 |
40,000-59,000 miles |
|
0.40 |
60,000-79,999 miles |
|
0.20 |
80,000-99,999 miles |
|
0.00 |
100,000 miles or more |
Continuing with the $35,000 car example, let’s assume the vehicle has 50,000 miles. You would multiply 0.60 by $2,625, which is the value after applying the damage multiplier. The result is a max diminished value claim of $1,575.
The National Association of Diminished Value Appraisers (NADVA) provides a free online diminished value calculator. You can use this as a resource in addition to your own 17c calculations and appraisals you collect. To use the calculator, you provide:
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Your contact information, including name, phone number, email, and state of residence
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Your vehicle information, including the year, make, model, and body type
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The car’s pre-accident value — the calculator links to KBB.com in case you don’t have that value yet.
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Information about the accident and cost of repairs
According to NADVA, the calculator was created by certified vehicle appraisals with experience in diminished value claims.
The insurance company may not agree with your claim amount. This can happen when:
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You and the insurer disagree on the damage level.
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The insurer does not use the 17c formula. Some insurers may rely on other methods to determine diminished value. These include market comparisons and professional appraisals.
If the insurer does not agree with your diminished value assessment, your claims adjuster may make a counteroffer or ask you to produce more inspections and evaluations. You can fulfill the requests and attempt to secure a higher offer yourself or hire a lawyer to negotiate for you.
To secure a higher diminished value claim, comply with all information requests from the insurer, stay focused on value, and supply as much documentation as you can.
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Comply with information requests. The insurer may ask you to supply more photos, calculations, valuations, etc. Although it may be tedious, fulfill these requests.
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Stay focused on value. In your conversations with the claims adjuster, keep the conversation focused on how your car’s value has changed. It might be tempting to talk about the work you’ve missed or injuries you’ve sustained from the accident, but those claims are separate issues.
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Document your position with third-party reports. You may need to collect multiple appraisals to convince the insurer that your number is fair.
If your repair-based or inherent diminished value claim is disputed or you cannot come to an agreement on the settlement amount, most states allow you to request mediation or arbitration through a third party. If working with an attorney, you can also opt to take the case to trial.
Depending on the complexity of your case, you may choose to hire a lawyer to help navigate negotiations around the diminished value of your vehicle and your settlement.
Personal injury attorneys are well-versed in negotiating with insurance companies to get the best possible settlement. If you’re already working with an attorney for a personal injury or property damage claim, they may also be able to help with your diminished value claim.
Be aware that many car accident attorneys charge a fee on contingency (meaning, if you win, you pay the fee) that’s equal to one-third of your recovered damages. Even if they are willing to charge a flat rate for their services, you may not recover enough extra (on top of whatever the carrier is already offering) to warrant the attorney’s fee.
There are two primary types of diminished value to understand: inherent and repair-based.
Inherent diminished value is the drop in the perceived value of a vehicle simply because of its involvement in an accident, compared to a non-wrecked version of the same car. Accidents are reported on your vehicle’s Carfax history, so they’re almost guaranteed to reduce the car’s market value.
Repair-based diminished value occurs when your vehicle cannot be perfectly repaired and restored to its original condition following an accident. This may be due to available parts or even the repair shop’s choice to use after-market parts to repair the vehicle. Even without a change in functionality, these lower-quality repairs or parts will depress your vehicle’s market value.
Wrecking your car is inconvenient and costly, even if you’re not at fault. Once your car has been repaired, you may be surprised to learn that you’re not “made whole” because your vehicle is now worth less. Filing a claim for the diminished value of your car is one way to get compensation from an at-fault party’s insurance policy so you’re limiting your losses for an accident you didn’t cause.
If the at-fault driver is uninsured, you may be able to file a diminished value claim through your uninsured motorist coverage. Note that this option is not available in every state.
Most providers exclude diminished value reimbursement for at-fault parties. So if you were responsible for a wreck, you are unlikely to get a diminished value settlement even though your vehicle may be worth less after repairs.
Lawyers are skilled at negotiations, but they also charge fees. You must assess whether the lawyer can raise the insurer’s offer enough to cover the extra fees. Note that some lawyers will only accept diminished value claims if they are also representing you in a personal injury case resulting from the same accident.