Most drivers who wonder what is diminished value own a car that was repaired and have a low offer from an adjuster. Put simply, it means this. It is the drop in resale value a car suffers because buyers know about the crash, even when the repair was good.
The Diminished Value of a Car After a Repair
The Washington insurance regulator explains it in a straightforward way. Diminished value is the difference between what your car was worth on the market before the crash and its worth after repairs. Parts and labor are what the repair bill covers. The repair bill does not cover the mark left on the car's record.
The same loss may be called diminution in value by courts and lawyers. The terms are not the same, but the concept is. The shop returned your car looking fine, but a dealer will now offer you less for it.
The Three Types, Including Inherent Diminished Value
Three kinds of loss are named by both Kelley Blue Book and J.D. Power. The starting point for each one falls at a different stage of the repair.
- Inherent: the loss tied to the crash appearing on the history report. This type applies even with a flawless repair, and most claims center on it.
- Repair-related: the added loss that comes from a bad repair job. A door that does not shut right or paint that fails to match drives the price down further.
- Immediate: the loss that exists before any repair is done. The loss becomes relevant when you sell the car, or trade it in, before the damage is fixed. Insurers rarely get claims of this type.
The type of diminished value car owners most often ask about is inherent loss. It is also the most difficult kind to spot, since the car's appearance gives no clue.
The Reason a Car’s Worth Falls After an Accident
Once a car has been in an accident, its diminished value begins with what the history report says. A shopper for a used car has the option to look it up before paying. The buyer then has a reason to offer less if a crash shows up. Buyers will pay less for a car they know was damaged, the Insurance Information Institute says. A repair done to top standards does not change that fact.
Damage happens often, which is why buyers check. Of the used cars offered for sale, Carfax says, about 1 in 4 have sustained damage. The same source found that 25% of owners with a damaged car put it up for sale within one year. A history with no crashes now helps sell a car, and an entry for one removes that edge.
How Much Does an Accident Devalue a Car?
No one number fits every case. CarGurus ran a big study that checked 2 million listings. Forbes reported that cars with a crash history were worth 3% to 12% less, in general, than similar cars without one.
Carfax states the loss in dollars. Its guide to diminished value says the average drop in a used car's retail price is about $500. For severe damage, that number climbs to $2,100. Another Carfax page lists severe damage at $1,700, so consider both figures as rough estimates.
What matters most is the type of damage. For dents and bumpers, Property Damage Pros, an appraiser group, lists a value loss of 2% to 5%. A bent frame or subframe puts the figure at 15% to 30%. The car's age matters as well. The Insurance Information Institute points out that an older car may gain value after a repair, because new parts took the place of old ones. Answer three questions to see a range for your car from our calculator.
Diminished Value vs Depreciation
Every car loses value as it ages and gains miles. That loss is depreciation. Over its first two years, a new car loses about 30%, then 8% to 12% yearly after that, Kelley Blue Book says. You do not get paid for that loss. It occurs whether you crash or not.
Normal depreciation already took some value, and a crash adds a further loss on top. The same idea comes from Kelley Blue Book: beyond the aging loss, a crash strips away more value. A claim can seek payment for that added loss from the insurer of the other driver. Diminished value vs depreciation boils down to one test. Imagine the crash never happened, and then ask if the car would still be worth this much less.
Diminished Value Insurance: Does Insurance Cover It?
Payment normally comes from the other party's insurer. The Insurance Information Institute points out that you should get this money in every state but Michigan if someone else hit you. The payment comes from the at-fault driver's liability coverage. A claim against that insurer is known as a third-party claim.
The situation with your own policy is not the same. Filing against your own policy is a first-party claim, and most collision coverage does not pay for this loss. A study in the NAIC Journal of Insurance Regulation examined the rules state by state. The study found Georgia is the only state with a clear rule letting drivers claim this loss on their own policy. When the at-fault driver lacks insurance, roughly half of states let you file a claim under uninsured motorist protection.
No matter which route you take, you must prove the loss. Our state rules table tells you what your state permits. The claim steps explain how to ask for the money.