One moment you’re driving along the freeway and everything is fine. The next minute, traffic stops and you get rear-ended. In that instant, the car has lost a significant amount of value. Even a brand-new vehicle with very low mileage can lose thousands of dollars in resale value with just one fender bender. Why? This effect is known as diminished value.
Because of diminished value, the average car loses 10 to 25% of the market price it had before the crash; this percentage can be even higher for luxury cars. The impact that a single collision can have is understandably frustrating. Find out more about diminished value, Ohio laws regarding compensation for value lost in an accident, car insurance coverage, and the claims process.
How Diminished Value Works
A car accident sets in motion an unfortunate domino effect. When a crash is reported to an insurance company, the car or cars involved get an accident history connected to the VIN. This blemish ruins a perfectly good vehicle history report. Subsequently, the vehicle loses a lot of value.
Of course, the vehicle can be repaired after an accident. Even if auto repair work is done by the dealership, uses authorized original parts, and restores it to its original condition, this doesn’t help gain back the value lost. The accident history will necessarily lower the resale amount and the value of the vehicle perceived by possible buyers.
How This Principle is Applied
There are actually three different types of diminished value.
Immediate Diminished Value
This is the difference when comparing the car’s resale value before the collision and after. The impact that an accident has on this amount is immediate.
Inherent Diminished Value
Some car buyers think cars are less safe and reliable following an accident, even when provided with a post-repair inspection. Because of this, they are less willing to pay top dollar for pre-owned vehicles with a less-than-perfect history. Even when the car is repaired, that accident history can never be wiped clean. This perception of lower value is called inherent diminished value.
Repair-Related Diminished Value
After a collision, it may be impossible to return the car to its original condition. Perhaps the car owner only wants to make it drivable again, but isn’t interested in having the paintwork or body repairs outlined in the original estimate done. Or less reliable auto body shops might may a mistake when fixing the car. The use of lower quality aftermarket parts can also affect what is called repair-related diminished value.
What You Can Do About Diminished Value
Many car owners think that they simply must accept this loss after an accident. Fortunately, when you were not at fault, it is possible to submit an insurance claim to request compensation for the difference in value. If the claim is accepted, you can get money back from the insurance company. The amount paid should cover part of the difference between the car’s value before the accident and its actual value after being fixed. Sometimes the payout totals a few thousand dollars for newer or more expensive models.
Note: Each insurance policy and state have different regulations regarding this. Check with your car insurance company and get informed about the diminished value laws in your area.
How to Make a Diminished Value Insurance Claim
To file a claim for diminished value, you will need to provide information about the value lost because of the accident. Having the car appraised, asking the dealer for a trade-in value report or using online services like Kelley Blue Book can provide this information.
In most states, insurance companies will also need to determine who was at fault for the accident before agreeing to pay back the diminished value.
The insurance company may handle this claim in one of the following three ways:
- Accept the claim and agree to pay the full diminished value amount;
- Accept the claim and agree to pay a lower amount;
- Deny the claim.
Diminished Value Claims in Ohio
In tort states, including Ohio, car owners who feel their claim was unjustly denied can pursue legal action for payment of the diminished value amount.
In Ohio, car owners can request repayment for the cost of repairs and the value lost in a car collision where they were not at fault. This also applies to cases involving unfair loss value appraisals and uninsured drivers. The state has set a two-year limit in which these types of suits must be filed.
Car Value Resources
- Vehicle History Report
- Diminished Value Calculator
- How to Make a Diminished Value Claim
- Free Diminished Value Claim Review
For more information, read Steps to Take after a Collision…The Accident Road Map.
Reliable Auto Body Repair
When it comes time to find a shop to complete the repairs for you, we recommend keeping in mind the value of working with an independent shop, like ours, as opposed to using the dealer. The reality is that we rely on the quality of our repairs and reputation within our community, while dealers can be propped up by their manufacturer.