What Is Diminished Value?

A simple definition of diminished value is the difference between a vehicle’s market value before the harm and its lesser value after the repairs have been made. Diminished value is different than the usual car depreciation rate that happens as a vehicle ages and gradually loses value over time.

Diminished value is an additional form of depreciation resulting from the damage history.

What Is a Diminished Value Claim?

A diminished value claim is intended to make up the difference between the car’s value before the accident and its lesser value after the repairs have been made. Depending on the circumstances, you may be able to file a diminished value claim to help you recover your car’s loss in value so you’re made whole after the accident.

As a rule of thumb, you can only make a diminished value claim when the accident was not your fault.

Typically, if the accident wasn’t your fault, you would file a diminished value claim with the at-fault driver’s insurance company – it’s covered under their property damage liability.

You may be wondering why you can’t claim diminished value under your own insurance policy. Most people’s insurance policies have an exclusion for diminished value that says it is not covered. Collision and comprehensive coverage pays only the amount necessary to repair or replace the damaged vehicle and diminished value is not covered.

There are three types of diminished value:

IMMEDIATE DIMINISHED VALUE:

The difference in market value immediately before the harm and immediately after the loss (before repairs).

For example; a vehicle was worth $50,000 just prior to being damaged and now in its damaged state, it is only worth $35,000 because the damage hasn’t been repaired yet.

$50,000 – $35,000 = $15,000 Immediate diminished value.
Most people will end up repairing their vehicle after an accident, but never file an Immediate Diminished Value claim.

INHERENT DIMINISHED VALUE:

The difference between a vehicle’s market value before the harm and its lesser value after the repairs have been made. Inherent diminished value is a result of the accident/damage history.

Repairs can restore a portion of a damaged vehicle’s lost value, but not all of it. Despite the repairs, the value of the vehicle is still less than what is was before the damage occurred because it has a damage history. This is the most common type of diminished value. It’s also the type of diminished value that an insurance company will compensate you for.

For example: a vehicle was worth $62,000 just prior to being damaged. After being properly repaired, it is worth just $48,000.

$62,000 – $48,000 = $14,000 Inherent Diminished Value.
Even with high quality repairs, potential buyers are unwilling to pay as much for a car they know has been previously damaged.

REPAIR-RELATED DIMINISHED VALUE:

Loss in market value due to substandard collision repairs. This may include something such as mismatched paint or misaligned body panels where the gaps are noticeably off.

Repair related diminished value is usually the responsibility of the repair facility and is the result of poor workmanship. Because it was the repair shop’s fault, it falls outside the scope of what an insurance company would typically compensate you for when making an insurance claim.

Do I Qualify to Make Claim for Diminished Value?

Use the following checklist to help determine if you qualify. You may be able to file a diminished value claim if the following applies.

  • Vehicle is newer with low mileage (typically less than 7 years old with under 100,000 miles)

  • Your car worth more than $7,500 before the accident

  • Vehicle was in good condition prior to the accident

  • The damage repairs cost more than $500, or were structural in nature

  • Vehicle does not have a previous accident history, or if it was in an accident, the previous damage was minor

  • Another driver was at-fault for the accident

  • The vehicle is not leased

    If your diminished value claim is denied or if you receive a low offer, you’ll first want to negotiate. When you receive a low offer, you should make a counter offer.

    If the offer is still too low or if your claim is still being denied, you’ll need to take legal action. Most of the time you can take the at-fault driver to small claims court.

    In these circumstances, hiring a seasoned SeismiQ Claims Service Umpire is critical.