Even minor car accidents can cause significant property damage to your vehicle. Repairs are time-consuming and costly, but buying a new vehicle is a daunting task, as well. How much money is your car worth after an accident, and does car insurance pay for the diminished value?
Car Accidents and Depreciation
A brand-new car depreciates immediately after driving it off the car lot, sometimes by 20% or more. It will continue to depreciate up to 55% in the next three years. Determining the value of your vehicle is based on the make, model, and year, but also on any added features, mileage, and even the color of the vehicle.
If your car is already depreciating, does a car accident make a difference in the value? Yes. Collisions have a significant impact on a vehicle’s value, and the more accidents the car has been in, the lower the value will drop.
Depreciation Value of Cars After an Accident
Vehicles that are involved in accidents depreciate about 25% faster than vehicles that are not involved in accidents. This will affect how much money you will get for it if you decide to sell it later or if you plan to use it as a trade-in. The exact value and depreciation factor will depend on the severity of the accident and the damage, as well as what type of damage was incurred.
Did you know that insurance companies often use cheap, bargain parts when repairing your damaged vehicle? That’s because an insurer’s first priority is their profits, and saving money wherever they can translates to more money for them. When cheap replacement parts are used, the value of your vehicle diminishes even further.
Determining the Lost Value of Your Car
Diminished value is the amount of value lost after a collision. You can calculate diminished value if you know the market value of your vehicle before and after your accident. To determine the total value your car has lost, you can evaluate the following types of losses.
This is the value that is lost when an insurer refuses to cover anything but cheap, aftermarket, or used parts in your vehicle’s repair. Repair-related losses can also occur if the mechanic or technician improperly repairs your car.
Inherent diminution is the value that your car loses just for being in an accident. It is not caused by the quality of parts or technicians.
Your vehicle repairs may not be covered by insurance, and this can happen for a number of reasons. The insurance company may refuse to pay for necessary repairs, your coverage may not include repairs to your own vehicle, or the at-fault party may have been uninsured. Losses like this that are related to your insurance claim can also cause the vehicle’s value to diminish.
Do Insurers Pay for the Diminished Value of a Vehicle?
It is unlikely that the diminished value will be covered by your insurance company if you were not at fault for the accident. Even though your insurance company may cover the costs of vehicle repair while you go through the settlement or litigation process, it will probably defer payment of diminished value to the at-fault driver’s insurer.
Diminished value can be included in settlement negotiations or as part of a court-ordered award amount. Again, you will need to determine the value of your vehicle before and after the accident. Even in the case of a total loss, it is possible to argue that the value of your car exists because you used it for transportation to work, medical appointments, and errands.
It is important to note that not all insurance companies allow for diminished value to be collected. Your policy documents should include terms that discuss this. In some cases, you may need to include a statement that includes proof of loss, such as the value of your vehicle according to a certified professional, photos of the damage, and documentation of the repairs.
Is Filing for Diminished Value Always a Good Idea?
Because of the time, effort, and stress involved in most accident claims, diminished value is not always worth pursuing. These claims are complex, so understanding the elements and implications can help you make an informed decision about whether or not to file.
One of the most important aspects to consider is your car’s accident history. Has it been in collisions before? What types of accidents and repairs have taken place previously? If you bought the car used, this can be especially difficult to figure out. Vehicles with low pre-accident value might not see a substantial change in value after an accident.
Additionally, if you were at fault for the accident that caused your car’s damage, an insurance company is not likely to approve your diminished value claim. This element can be confusing because many states use comparative fault to determine liability, which means more than one person can be found responsible. Even if you are only found partially at fault, your claim for diminished value could be affected.
The overall value of your vehicle, separate from the depreciation caused by the accident, should also be considered. Is your car a classic, or is it a rare edition? Does the make and model tend to retain value longer than other makes and models? Or is your vehicle an inexpensive stock model? These could all impact the diminished value of your vehicle and change how you view filing the claim with the insurer.
Working with an Accident Attorney
The layers of complexity involved in car accident claims, diminished value, and depreciation can seem overwhelming during a time when you need to be focused on recovery. Contact Seitelman Law Offices to schedule a free consultation with one of our personal injury attorneys.