Diminished value is the loss of value due to an auto accident. Usually, insurance companies don’t pay for a vehicle’s diminished value but many consumers feel that it is the insurance company’s responsibility to pay for a diminished value claim.
A wrecked and repaired vehicle will always be inferior to, and have less value than an undamaged counterpart.
Here is an example: You have a brand new car. After an accident your insurance company fixed your car back to its original condition. You go to sell your car and since the new buyer checked out the vehicle’s history report and found that it was in an accident, they are not willing to pay anything near what your car is actually worth and worse… some buyers won’t consider buying your vehicle at all since it was in an accident! Obviously your vehicle has incurred more than just physical damage, but damage on its value also.
Why would the insurance company not want to pay for the diminished value? First, insurance companies don’t feel that the vehicle’s diminished value is something that they are required to pay. The insurance company is obligated to repair the vehicle to the condition it was in before the accident and they don’t feel that compensating for the loss of value is part of that compensation. Furthermore, since the insurance industry has not included a diminished value coverage in insurance policies, they say it will cost consumers thousands of dollars to add such coverage.
An example of Diminished Value:
A Cadillac had an actual cash value of $25,000 before the wreck. Due to a rear-end collision that caused $10,500 in body and structural damage the post-repair market value of this vehicle is now $20,400.The immediate loss in resale value, in this case $4,600, is legally owed to the vehicle owner by the insurance company.
Although your body shop does an excellent job, and your vehicle looks as good as it did before the accident, it’s now much less desirable having been in a collision, should you decide to sell it now, or down the road.
Many times a frame or structurally damaged vehicle cannot be sold as a “Pre-Owned Certified Vehicle”. This will impact the vehicle’s value by as much as 40%!
This is where diminished value comes in! Your insurance company will be quick to write you a check for the repairs, but you’re entitled to diminished value.
If you list your vehicle for sale in the newspaper for $25,000, the first thing a buyer will ask is “Has the vehicle been in an accident?” Even if you didn’t disclose the accident, the buyer could still look up the history using Auto Check or CARFAX.
Once they discovered the accident, the buyer would no longer be willing to pay you 25,000, but instead might offer $20,000. This is Diminished Value of $5,000.
Even if you’ve already settled with the insurance company on the body damage, you can still file a separate diminished value claim if the repairs were done recently.
Your claim for diminished value can be paid by your own insurance company or the other party’s company.
To be properly compensated for your loss in resale value, it is very important to hire a qualified Certified Auto Appraisers.
Know your rights if you’ve been in an auto accident. You may be entitled to a check from your insurance company. Diminished value is the automatic loss in value from a collision. Almost every vehicle that has been in a wreck will have some form of inherent diminished value.