How to File a Diminished Value Claim
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- But First, Why is the Value Diminished?
- How Diminished Value is Calculated
- Information You Need to File a DVC
- Common Steps to File a Diminished Value Claim
You’ve slapped a “For Sale” sign on the windshield and posted your car in the online classifieds. Your car looks great, drives like a dream, and only has one car accident on the vehicle history report. But as you wait for the inquiries to roll in, none arrive. Frustrated, you ask yourself, “Why?”
It’s because you’ve priced it the same as another identical car. The same make and model, the same year, similar mileage, and almost copycat features and condition. But the difference is that the other car doesn’t have a car accident on record. Because of your car accident, your car has diminished value from its pre-accident value, even with minor damage.
That doesn’t immediately mean you or other car owners have to give away the farm to sell a car with an accident history. In some cases, you can recover the difference in value with a diminished value claim.
But First, Why is the Value Diminished?
Let’s look at fruit as an example. You have one apple in each hand, perfectly identical in every way. The same size, variety, color, and ripeness. Your experience eating either one is exactly the same. Then, you accidentally drop one of your apples and bruise it. When you pick it up and give someone the choice of apples, they will always take the apple that hasn’t been dropped. Even without major damage, it has diminished value.
The same goes for vehicles. When you compare two identical cars but one has been in an accident and repaired, no matter how perfectly, a buyer will always choose the one that hasn’t been damaged at all. The Insurance Information Institute says, “This difference between what the pre-accident car was worth and the market value of the post-repair car is known as diminished value.”
How Diminished Value is Calculated
Determining exactly how much a vehicle’s value has diminished is impossible since it’s completely about a buyer’s perception and intentions. However, there’s a formula that prominent car insurance companies use to calculate the diminished value.
- A Base Loss of Value amount is calculated as 10% of the national Automobile Dealers Association (NADA) retail value.
- The Base Loss of Value is multiplied by a damage modifier from severe to no structural damage.
- The result is then multiplied by a modifier based on the car’s mileage, whether average, high, or low.
For example, a car worth $20,000 that has 50,000 miles with moderate damage would have a Base Loss of Value of $2,000. With moderate damage, $2,000 is multiplied by .50 for a value of $1,000. Then, with 50,000 miles on the clock, it further modifies the value by .60 for a final DVC amount of $600.
However, your insurer may dispute the value of your DVC. You may need to have an independent appraisal performed locally to determine the DVC amount. You can source an appraiser in your area with a simple Google search.
Information You Need to File a DVC
Getting your insurer to pay requires documentation to prove the validity and value of your claim. You’ll need:
- The NADA retail value, available at NADAGuides.com, using similar mileage, options, and features as your vehicle.
- The calculated DVC amount based on the formula above.
- A certified value from an independent appraiser for the current resale value.
Common Steps to File a Diminished Value Claim
Every state has its own criteria for filing a DVC. In some states such as Alabama, there’s no precedent currently for paying you the diminished value. In others like California, the issue is unclear and may allow a jury to award diminished value. In states like Georgia, Colorado, and several others, you may be eligible for compensation in a DVC.
1. Obtain Proof of Your Car’s Pre-Accident Value
If you’ve calculated the diminished value of your car, you’ve already found your pre-accident value. This is the NADA retail value that uses your car’s options, age, and details to determine what it was worth. Print the value to include with your claim and find vehicle listings from dealerships and private sales to support the valuation.
2. Have Your Vehicle’s Current Value Appraised
For the most accurate DVC amount, calculate the DVC using the formula used by insurers as well obtaining an independent appraisal. In some cases, the calculation can work in your favor while in others, it falls short of the actual diminished value.
3. Determine Which Party’s Insurer to File Claim Against
If you live in a no-fault state or you have coverage through your insurer, file your claim with your own insurance company. Otherwise, file the claim with the other party’s insurance provider.
4. Settle Your Claim
There are three options for settling your DVC with an insurance company: They’ll accept the claim and pay you, they’ll deny your claim, or they’ll negotiate an adjusted value.
Just because your car’s been damaged in an accident doesn’t mean you have to automatically take the loss when you sell your car. Look into a diminished value claim and keep more of your money in your own pocket.