The moment you purchase a new vehicle, it begins depreciating in value. After just a few years, your vehicle could be worth as little as half its sticker price.
If your vehicle is involved in a collision in Bowling Green, you can expect the vehicle to lose another 20% of its value.
All is not lost, though. If your car is damaged due to the wrongful action of another motorist, you might still find you can get compensation for the value of your vehicle. Compensation is typically determined by the Kelly Blue Book value of your vehicle. This guide will highlight this process for you.
Flora Templeton Stuart Accident Injury Lawyers represents clients with no fee to collect property damage and assets to collect property damage.
Automobile Depreciation 101
Depreciation is a term used in finance, economics, and business expressing an asset’s reduction in value over time.
Kitchen appliances are a common example of assets depreciating in value. The stove top you bought three years ago might still work perfectly, but its resale value will be substantially less than you paid for it. Electrical goods also depreciate. Your TV and audio equipment will be worth only a fraction of the sticker prices after a year or two.
In most households, cars are the largest depreciating asset. The moment you drive a brand new car off the lot, for instance, its value reduces. According to CARFAX, new vehicles typically depreciate by 10% or more during the first month.
Factors impacting the speed at which a car depreciates include:
- Age of car: Vehicles will gradually depreciate as they get older, although not at the same rate (unless they are considered a ‘classic).
- Make and model: Some makes and models will depreciate at a slower rate than others due to a better reputation.
- Number of owners: Used cars with multiple owners will depreciate more rapidly than those with fewer owners.
- Mileage: The higher the mileage you cover in a car, the quicker the rate of depreciation.
- Maintenance documentation: Vehicles regularly inspected and maintained are liable to hold their value better.
- Condition of car: The condition of a vehicle always impacts its rate of depreciation. Care for your car well and it will hold its value for longer.
What Does Diminished Value Mean?
Diminished value expresses the loss in the market value of a car after it has been damaged in a wreck and then repaired.
Even when the vehicle is fully restored, its market value still decreases. Diminished value refers to the difference in value of the vehicle before and after the wreck.
Categories of Diminished Value
Diminished value is categorized as follows:
- Immediate diminished value
- Inherent diminished value
- Repair-related diminished value
All of these forms of diminished value concern car depreciation after a crash.
Immediate diminished value
The difference in a vehicle’s resale value directly after a crash but before repairs is labeled immediate diminished value.
You are unlikely to use this form of diminished value if you file a diminished value claim.
Inherent diminished value
The most widely accepted form of diminished value is inherent diminished value. This umbrella term expresses the loss of value of a vehicle due to its damage history.
If the fender and rear doors of a vehicle are damaged in a collision, the car can be easily restored in a body shop. That said, there will still be some diminished value since the accident will enter the car’s vehicle history report.
Repair-related diminished value
When considering inherent diminished value, it is assumed that repairs are made optimally.
Repair-related diminished value expresses the loss in value of a value based on sub-par repairs, mismatched paint colors, for example.
Poor quality repairs will increase a car’s depreciation, and repair-related diminished value considers a vehicle impossible to restore to its original condition.
How Badly Does an Auto Accident Impact a Car’s Value?
When you drive a new vehicle off the lot, it will lose at least 10% of its value within the first month. During the first three years of ownership, a car depreciates by anywhere from 40% to 55% and above. The variables outlined above influence the rate of depreciation.
If the vehicle is involved in an accident, the rate of depreciation will accelerate further.
Determining the Value of Your Car After a Collision
To determine a vehicle’s diminished value, most insurance companies utilize formula 17c, named for a claims case involving State Farm. 17c refers to where diminished value entered the court records.
To calculate diminished value using formula 17c requires the following four steps:
- Check your car’s value.
- Calculate a baseline for depreciation, typically 10%.
- Apply a multiplier based on the severity of the damage to your vehicle.
- Apply a multiplier based on the mileage of the vehicle.
Despite this formula being almost universally used by car insurers to calculate diminished value, it is a flawed formula that frequently leads to lower diminished value appraisals that do not reflect the true diminished value of a vehicle.
Filing a Claim to Get the Compensation You Deserve
If you need to file a diminished value claim for your vehicle, expect the process to be involved and time-consuming.
Many insurance companies deny diminished value claims when the claimant is unable to prove lost value, whether through failing to properly complete paperwork, or through failure to comply with the insurer’s demands.
The complexity of diminished value claims means it is advisable to speak with an experienced car accident attorney. Trying to deal with insurance companies alone can be challenging, and you have less chance of achieving the best outcome.
Flora Templeton Stuart Accident Lawyers in Bowling Green, Kentucky, has helped many people just like you navigate the car accident claim process. We never charge a fee for property damage when we represent a client injured in a car accident. Our attorneys also work on a contingency fee basis, meaning that you pay nothing unless we win your case. If you have been injured, contact our experienced Bowling Green car accident attorneys today for a free consult.