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How is the actual cash value of your vehicle determined?
I just got into a car accident and my vehicle was declared a total loss. My insurance provider told me I’d receive a payout based on the ACV, but I’m unsure what that means. How do insurance companies determine the actual cash value of a vehicle?
Emily Maracle · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Whether you’re looking to purchase a new car or pay off an old one, knowing the ACV of your vehicle is a big help. Insurance companies determine the actual cash value of your vehicle by subtracting the amount it has depreciated from its original purchase price.
Imagine you bought a car two years ago for $30,000. By the time your insurance provider declares it a total loss, it has depreciated by 25%, or $7,500. Take $30,000, subtract $7,500, and you get an actual cash value of $22,500.
The next obvious question is, “Who decides depreciation?” The answer is that insurance companies consult a variety of internal databases (including current market values) and software to determine a car’s depreciation rate.
While you’re waiting on your insurance payout, try using a site like
Kelley Blue Book
or Edmunds
to estimate your vehicle’s ACV. The results should be fairly accurate.View full answer
- Gregory R.
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Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
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