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Understanding Diminished Value Claims After a Car Accident

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What Is a Diminished Value Claim?

A diminished value claim allows car owners to recover the difference between a vehicle’s value before an accident and what it’s worth after an accident, once repairs have been completed.

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 can fall short, covering only the cost of the repair, and not addressing the car’s lost value. Owners may not discover that missed amount until it comes time for them to sell their car. 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.

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 a 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. 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 from an online car value tool like Carfax’s free History-Based Value. 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.

Car appraisal / Insurance adjuster

Photo Credit: Getty / fstop123

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.

Next Steps

If you have questions about this story, please contact us at Editors@carfax.com