Your car looks great after repairs from a rear-end collision. But make no mistake about it, your vehicle is now worth thousands less than before the crash.
That’s reality of luxury car ownership. Unfortunately, most vehicle owners don’t realize their vehicle’s value was compromised until it’s too late.
Diminished value exists. You can measure it. You can recover it. But you have to take action.
Read this guide to learn:
- Exactly what is diminished value?
- Why luxury cars lose more value than others
- The 3 different types of diminished value
- How insurance companies low-ball recoveries
- Steps to file a successful diminished value claim
What Exactly is Diminished Value?
Put simply, diminished value is the reduction in a vehicle’s market value due to damage from an accident.
Accidents will show up on vehicle history reports like Carfax or AutoCheck. That decrease in value will stick with the car long after repairs are paid for.
Diminished vehicle value isn’t theory. Every single day at dealerships and through private party sales throughout the country, diminished value is a measurable and recorded financial loss.
Here are a few facts to understand about diminished value claims…
- Vehicles can lose anywhere from 10% to 30% of their pre-accident market value when negotiating a sale after being damaged in an accident.
- Luxury vehicles tend to fall on the higher end of that range.
- Making a property damage claim for a rear-end accident without including diminished value is how most vehicle owners leave thousands of dollars on the table. When another driver is responsible for causing the crash, their insurance company owes you for both the repairs AND diminished value.
You may want to talk to a Virginia car accident lawyer who knows how insurance companies try to minimise diminished value claims.
Why Do Luxury Vehicles Lose More Value?
The severity of your claim depends largely on your make and model.
Consider this…
A mid-tier sedan worth $15,000 and a luxury SUV worth $95,000 are not measured on the same scale when it comes to diminished value claims.
Luxury vehicles carry weight in terms of brand recognition and reputation. Someone spending $90,000 on a used Porsche, Mercedes, BMW wants a perfect history.
Buyers turn on a dime when they see that accident on the Carfax.
Repairs can be completed to five-star quality, but the stigma of a crash will always remain. Sales data has shown luxury vehicles lose 25% of their value after an accident when negotiating a purchase. On a $90,000 vehicle, that’s $22,500 owners may never get back.
Need another reason why diminished value is crucial for high-end vehicles? Well…
Rear-end accidents are the most common accident you can be involved in. The National Highway Traffic Safety Administration reported rear-end collisions accounted for 28.4% of total traffic crashes in 2022 alone. High-value vehicle owners are not exempt. Even a low-speed rear-end crash can lead to devastating, long-term drops in resale value.
3 Different Types of Diminished Value
You should know these before filing a claim.
Inherent Diminished Value
Also known as straight dim value. The simple fact that an accident now exists on your vehicle history report will cause your resale value to drop. Buyers assume there is more damage that isn’t visible, and that fear costs owners money.
Repair-Related Diminished Value
Even if the accident is repaired perfectly, some vehicles come back from the shop with overt flaws. Paint color doesn’t match. Aftermarket replacement parts were used instead of OEM. Panel gaps are visible. The car vibrates and rattles more after the repair.
All of these are legitimate reasons a buyer would offer you less money when it comes time to sell. For luxury cars, imperfect repairs are catastrophes.
Immediate Diminished Value
The reduction in resale value that occurs immediately after an accident, before any repairs are completed.
Some people attempt to file claims based solely on immediate dim value. It can play a part in the overall claim if your vehicle is considered a total loss by the insurer.
Most diminished value claims following a rear-end collision against high-value vehicles focus on inherent and repair-related drops in value.
Insurance Companies Calculate Diminished Value Using…
Wait for it…
The 17c Formula
Manufactured by insurance companies. Designed to low-ball recoveries across the board. Here is how that formula works:
- Step 1: Calculate 10% of your vehicle’s market value BEFORE it was damaged in an accident.
- Step 2: Multiply that number by a damage severity factor ranging from 0.00 to 1.00.
- Cosmetic damage only = 0.00
- Mechanical and structural damage = 1.00
- Step 3: Account for mileage on the vehicle. High-mileage cars receive a reduced recovery.
Taking that process down to three easy steps reveals the dreaded result…
Insurance companies start every diminished value calculation with 10% of your vehicle’s value BEFORE the accident.
Think about that…
On a $100,000 vehicle that suffered severe accident damage, the maximum possible diminished value recovery starts at $10,000. After mileage and damage coefficients are applied, that number gets even smaller.
Consumer Reports found the average vehicle lost $2,100 in retail value after severe accident damage. Using professional appraisal experts that specialize in diminished value, totals regularly exceed that by 10x.
That’s why getting your own professional appraisal is so important. Settling for the insurer’s first offer without seeing one is how you leave thousands on the table.
How Do I File a Successful Diminished Value Claim?
Take notes. This doesn’t happen by accident.
- Hire a professional to conduct a diminished value appraisal.
- Not your mechanic. Not your local body shop. A trained professional who specializes in diminished value.
- Gather any and all documentation you can find.
- Police report, repair bills, photos of damage before and after repairs, a current Carfax or AutoCheck.
- Document “clean” examples of your make, model, year, and mileage selling locally.
- You will need these when presenting sales data to back up your claim.
- Send a written demand to the at-fault driver’s insurance company. Attach your appraisal and any supporting documents. Make your demand clear by asking for a specific dollar amount.
- Negotiate.
You will likely not get everything back that you are owed. However, you can fight for it. The initial offer from your insurer will always be a low-ball number.
Do not settle for their first offer. And whatever you do, do NOT leave the diminished value portion of your claim off the table.
Let’s Review
Here’s what you need to remember about filing a diminished value claim after a rear-end collision:
Diminished value is money owners lose for repairs to their high-end vehicles caused by someone else.
That money is recoverable through your or the other driver’s insurance company by filing a DIMANSIONED value claim.
If you don’t know exactly what you’re looking for and how insurance companies will try to low-ball you, you leave money on the table.
By knowing there are three types of diminished value and filing your claim with the right information, recovering lost profits can be a reality.
Failing to include diminished value with your claim is how you lose.
