Diminished Value Claims: How Decreased Car Value is Calculated
What is a Diminished Value Claim?
When a car gets damaged in an accident, its value drops. The reason is that buyers don’t want to pay as much, and dealers won’t offer as much for a trade-in, for an accident-damaged car. Even if the car is in better shape after the accident than it was before it was repaired, your vehicle will lose additional value just because it was in an accident. The claim to recoup this loss is called a diminished value claim.
Many people believe that a car that has been repaired can never be quite as good as one that wasn’t damaged in the first place. Another common belief is that repair shops recommended by insurance companies for cars involved in accidents don’t do a thorough job.
These beliefs cause the value of the car to drop, even after repairs have been made. That is, the loss of value, due to the stigma against cars damaged in accidents, is over and above the cost of repairs. Insurance companies call this decrease the car’s “diminished value.” However, an attorney experienced with car accident claims can help you dispute low-ball settlement offers and pursue a diminished value claim.
Fact: You Can File a Car Insurance Claim After an Accident to Recoup Diminished Value
Many people aren’t aware that they can make an insurance claim for a car’s diminished value. Insurance companies don’t really want you to know about it, and even if you do find out and file a diminished value claim, the insurance companies will try to avoid paying or they will try to pay a low amount. Our attorneys can help you file a claim for diminished value after a car or truck accident, just give us a call or fill out a contact form to request a free consultation.
One thing insurance companies do to come up with a low amount is to use a formula called “17c” to calculate diminished value. That formula is good for the insurance company — and not good for the car owner.
The Insurance Company Formula
A lot of insurance companies use the 17c formula. It works like this:
First, the insurance companies start with the NADA Used Car Guide value of the car, adjusted for mileage, prior damage, and upgrades, to calculate how much your car was worth before the accident.
Then, they take 10% of that market value to get a number called a “base loss of value.” This is the most they will pay you for a diminished value claim. This step favors the insurance companies because 10 percent is an arbitrary number that may be a lot less than the actual decreased value of your car.
Even so, insurance companies are not done yet. After calculating the base loss of value, they then reduce the amount they will pay you even more if the damage to your car was anything less than severe and structural. They then reduce the amount again based on the car’s mileage.
There are problems with this formula every step of the way that make it unfair to you. What you end up with is a payment from the insurance company that is likely to be a lot lower than your car’s actual decreased value when you sell it or trade it in.
Insurance Companies Don’t Have to Use the 17c Formula
The insurance company may try to convince you that you have to accept its calculations based on the 17c formula, but that’s not true. The formula came out of a lawsuit in Georgia and is not required in Texas. In fact, it’s not even required in Georgia except for cars involved in that particular lawsuit.