What Happens to Your Car’s Value After an Accident?
According to Carfax data, damage can have a big impact on the price of a used car. The average hit to the retail price is about $500. That average impact on retail value jumps to $2,100 for a vehicle with severe damage in its past.
Car Values and Auto Insurance
Auto insurance is supposed to make car owners whole after an accident, but it often falls short, something owners may not discover until it comes time to sell the vehicle. That’s because a record of an accident typically becomes part of the Carfax Vehicle History Report, and it’s information that’s available to any buyer. It can be a costly problem when it’s time to sell your car.
For instance, a car dealer may knock hundreds or even thousands of dollars off your trade based on a previous accident. Simply put, your car is worth less than a similar model that has not been in a wreck.
What Is a Diminished Value Claim?
A diminished value claim allows car owners to recover the difference between the vehicle’s value before the accident and what it’s worth after the accident, once repairs have been completed.
How a Diminished Value Claim Can Help You
Car accidents can happen to even the best drivers, but there’s more money at stake than just the cost of repairing your vehicle: You might not be covered for the diminished value of your car.
Fortunately, consumers may have recourse if they file a diminished value claim with their car insurance company. That claim should be submitted to the other driver’s insurer, particularly if they were at fault.
How to File a Diminished Value Claim
Before you file a claim, get your car professionally appraised, so you can calculate the diminished value and have supporting documentation. For example, the value of your vehicle may have been $22,500 before the accident, but after all the repairs have been made, it may be appraised for only $18,000. That represents a $4,500 drop that you’ll want to recoup.
Contact the at-fault party’s insurance company and request compensation for the diminished value of your vehicle. Don’t expect the insurer to eagerly write out a check — you may need to be persistent and back up your request with information, including a copy of the appraisal. You will also need to demonstrate your car’s value, based on information available on an online car value site like Carfax’s free History-Based Value tool. Carfax History-Based Value looks at vehicle-specific information for pricing; accidents and damage are some of the many factors it considers.
If the auto insurer agrees to compensate, you may still not receive the full deficiency; they may use an industry formula to calculate the difference, and those numbers may be lower than yours. Try to negotiate the best deal you can, and remember that any coverage is better than receiving nothing at all.
You may discover that the auto insurer is not willing to compensate you. If they resist, you can take them to small claims court. You might also hire an attorney, especially if your car is expensive or new. But keep in mind that legal fees will be covered by you, effectively coming out of any settlement, if one can be reached.
Understand State Insurance Laws
Most states will allow owners to file a claim against the other party’s insurance company if they were at fault. If the person who hit your car was uninsured, you may still have recourse through your own company, provided you have sufficient uninsured motorist property damage coverage.
Review Your Auto Insurance Policy
Car accidents can take physical and emotional tolls, as well as cause a financial setback. It is important to regularly review your auto insurance policy and discuss your coverage options with your agent. Wherever possible, find ways to lower your risk and close any loopholes that could cost you.