A car accident can cost you in many ways. You might suffer injuries that require medical treatment. Your car could sustain damage and need repairs. You can miss work and lose income and benefits.
Many people overlook one significant accident-related cost, diminished value. It's the financial decline in the value of your car—even after repairs—from an accident. Many drivers don't realize that they can demand compensation through an insurance claim or lawsuit from an at-fault party for the diminished value of their car. A skilled car accident attorney in Las Vegas can get it for you.
Understanding Diminished Value
Diminished value is the economic loss in a vehicle's market value after sustaining damage in an accident. Even after repairs, a vehicle's value may still be lower than before the crash. Diminished value reflects the perceived worth of a repaired vehicle compared to one with no accident history.
There are three common ways to conceive of diminished value:
1. Immediate diminished value is the loss in value that occurs immediately after an accident but before any repairs. It's the difference between the vehicle's value before and immediately after a car accident
2. Inherent diminished value is the loss in value that persists even after repairs. As the form of diminished value that most people accept and recognize, it distinguishes between the value loss and the repair cost.
3. Repair-related diminished value is an additional loss in value from substandard or incomplete repairs, such as color mismatches, low-quality parts, or physical or mechanical issues from repair work.
Factors Determining Diminished Value
A vehicle's diminished value depends on various factors, including the following:
The Make and Model of the Vehicle
High-end luxury or vintage cars tend to suffer greater diminished value after an accident than mass-market vehicles, as their performance characteristics and pristine conditions comprise their value. Any accident history—even with comprehensive repairs—may significantly decrease their appeal to potential buyers.
The Age and Mileage of the Vehicle
Newer cars with lower mileage generally experience a higher diminished value after an accident, as buyers will pay a premium for vehicles closer to their original, off-the-lot condition.
Consumers expect older or high-mileage vehicles to have some wear, so an accident history may not significantly influence their value. (In some cases, post-accident repairs could increase a vehicle's value if it was in relatively poor condition to start.)
The Extent of the Damage and Quality of Repairs
The severity of the damage from an accident can greatly influence the scale of a vehicle's diminished value. Minor scrapes and dings might have a negligible effect, while major structural damage can create more significant effects.
High-quality work restoring the vehicle to a near pre-accident condition may result in less diminished value than poor or substandard repairs. Some bad repairs actually exacerbate diminished value.
The Vehicle's Value Before the Accident
The more valuable a car is before an accident, the higher the potential for diminished value. Even minor damages could significantly reduce the asking price of high-value cars. Vehicles with lower initial values may not experience a steep drop.
The Flawed 17c Formula for Calculating Diminished Value
You can calculate diminished value in several ways. Most insurance companies use the 17c formula from section 17, subparagraph c, of a Georgia court decision describing it.
The 17c formula assumes a baseline value loss of 10 percent of a vehicle's trade-in value according to the National Automobile Dealers Association's (NADA) vehicle-value guide. It assumes that cars lose 10 percent—at most—of their current market value after accident-related repairs. (When an accident destroys a car or creates damages with repair costs exceeding the pre-accident value, the vehicle becomes a total loss, making diminished value irrelevant.)
Multiply that 10-percent baseline by a factor between 0 and 1, according to the degree of damage the vehicle sustained (the damage modifier). Modify that figure by another factor between 0 and 1, accounting for the vehicle's mileage (the mileage modifier). Under the 17c method, vehicles that sustain no known damage or have over 100,000 miles have no diminished value. (Here's a sample 17c calculation worksheet illustrating the modifiers, courtesy of a Georgia auto appraisal company.)
As common as it is, the 17c formula receives well-deserved criticism for its systematic underestimation of a vehicle's diminished value. The assumed baseline loss of 10 percent fails to account for vehicle characteristics such as make, model, and pre-crash condition that factor into the loss of value.
Some vehicles lose far more than 10 percent of their value in a crash (think of a brand-new Mercedes or a mint-condition classic Corvette), and the 17c formula doesn't account for that.
The 17c formula treats physical damage as the sole contributor to loss of value, ignoring that a vehicle loses value simply by being in an accident. The 17c formula also unnecessarily discounts diminished value according to mileage, despite the starting calculation already factoring it in by using the vehicle's current NADA trade-in value. Given cars’ longevity, a car with 100,000 miles is absolutely capable of losing value in a crash.
Insurance companies love the 17c formula, as it often generates trivial value-loss amounts, even for high-quality cars. By touting it as an industry standard calculation, insurers frequently force drivers to accept far less for the diminished value of their vehicle than a fair calculation would establish.
Other, Better Methods for Calculating Diminished Value
There are better ways than the 17c formula to calculate diminished value, including a comparable vehicle sales analysis. This approach compares the selling prices of similar vehicles that have not been in an accident with those that have, establishing a market-based, average-percentage value loss for a specific damaged vehicle.
Although it's far more accurate than the 17c formula, this method requires substantial vehicle-sales data to identify nearly identical vehicles in make, model, year, mileage, and condition and compare one with an accident history to one without.
Another method is hiring a qualified appraiser to estimate the diminished value by evaluating the physical condition of the vehicle and considering the relevant market conditions. Involved parties are more likely to trust an appraisal that a certified professional with a background evaluating the specific make and model of the vehicle in question conducts.
Diminished Value Claims Explained
A diminished value claim is a request for compensation for your vehicle's inherent diminished value after a crash and repairs. You can file a diminished value claim if you're not at fault for the accident and your vehicle suffered material damage.
Your claim can seek to hold the at-fault party or its liability insurance carrier liable for your vehicle's value loss (among other personal injury damages).
In some instances, you can submit a claim to your own auto insurance company for diminished value. Since most insurers exclude diminished value from standard car collision coverage, review your auto policy's terms or ask an experienced attorney before making assumptions.
Insurance companies often resist paying diminished value claims.
While insurers recognize diminished value as a legitimate loss, they have an economic incentive to minimize the amount they pay for such claims. As a result, claimants often find themselves negotiating with insurers working to reduce payouts by using methods such as the 17c formula or disputing the extent of the vehicle's value loss.
Role of a Lawyer in a Diminished Value Claim
One of the surest ways to navigate the challenges and complexities of a diminished value claim is to seek the assistance of a skilled car accident lawyer. Here's why.
An experienced car accident attorney is familiar with the relevant laws and regulations and has the experience to effectively negotiate with insurance companies. A lawyer builds a strong case for the diminished value of your vehicle using independent appraisals and compelling evidence rather than simply accepting the insurer's estimates. They ensure the timeliness of your claim and argue your case in court if the insurance company resists paying what you deserve.
There are several other reasons beyond diminished value to seek guidance from a lawyer. Many accident victims sustain other losses for which they deserve fair car accident settlement from at-fault parties and insurance companies.
A lawyer pursues those damages and potentially obtains payment for your:
- Medical and other accident-related expenses.
- Loss of income, job benefits, and future earning opportunities.
- Pain and suffering.
- Emotional distress.
- Diminished quality of life.
- Scarring, disfigurement, or loss of bodily function.
Depending on the circumstances, a lawyer might convince a court to award you punitive damages, punishing reckless or malicious conduct and deterring others from engaging in similar behaviors.
The total compensation you might receive depends on several factors, including the severity of the damage to your vehicle, any injuries you sustained, the case a lawyer builds for you, your lawyer's skill and reputation, and the at-fault party's insurance coverage and other financial resources.
Don't worry about the cost of hiring a lawyer for your diminished-value and accident-related claims. Car accident lawyers offer free consultations to learn about your rights. They also work on a contingency basis, meaning they don't get paid unless they successfully recover compensation for you.
This makes skilled legal representation affordable even for claimants who might otherwise struggle to pay a lawyer's fees. It also motivates your lawyer to fight for the maximum compensation because your lawyer wins when you win. (Required disclaimer: You may have to pay an opponent's court fees and costs in the event of a loss.)
Contact an Experienced Car Accident Lawyer Today
If your vehicle sustained damage in a recent car accident, you may seek compensation for its diminished value and hold the at-fault party and their insurer liable for the losses you suffered.
To learn more about your rights to pursue a diminished-value or accident-related claim, contact an experienced Las Vegas personal injury lawyer today for a free consultation.