If you’ve been in a car accident that wasn’t your fault you should familiarize yourself with diminished value, or DV.
DV is the inevitable loss in market value your vehicle will incur as a result of being in an accident. No matter how perfect the repair job, nothing can change the perception of a buyer who looks at a car’s vehicle history and sees that it’s been in an accident. It’s damaged goods and not worth what it was before the accident.
You don’t file a DV claim with your own insurance, you file it with the at-fault driver’s company. All the burden of proof is on you, which means you have to make a convincing case for the amount of diminished value you’re claiming.
How Do I Calculate Diminished Value?
When you Google “diminished value calculation” you’re going to see sites promising easy steps using a diminished value calculator, also called an estimator. It’s a pretty simple process, and you can use the same estimator the insurance company is going to use.The starting point is to find your vehicle’s market value before the accident occurred. You can do this by using NADA or the Kelly Blue Book. Both sites have online tools you can use to calculate value by plugging in basic information like make and model.
To come up with a diminished value figure, insurance companies use the 17c formula originally created by State Farm. Insurers start with 10% of a car’s pre-accident worth as a maximum payoff amount then start subtracting based on damage and mileage multipliers.
To calculate damage, the formula assigns a number from 0 to 1 to each level of damage, with 0 representing no structural damage or replaced panels and 1 representing severe structural damage. The 10% base value is multiplied by the number matching the vehicle’s extent of damage,
So if your 10% base value is $4,000 and your car incurred moderate damage, you would multiply that figure by .5 to get $2,000.
Next, mileage is assessed using a numerical value between 0 and 1, with 1 being very low mileage and 0 being very high mileage. Let’s say your car has 45,000 miles on it; you would multiply $2,000 by .6 to come up with a diminished value amount of $1,200.
Easy as pie! RIght?
Does a Diminished Value Calculator Figure In Special Features?
Ah! That’s where you can go wrong with using a free online calculator to come up with a figure for diminished value. You’ll notice they don’t ask for any special features, trim packages, or maintenance history–all things that can make your particular car worth far more than the average generic models the 17c formula is based on!
Because it doesn’t take the unique value of your car into account, therefore, a diminished value estimator can significantly undervalue your car, costing you money if you accept it at face value. Insurance companies are happy to see people using the DV calculators to come up with a claim amount!
What they don’t like to see–and what they have trouble disputing–is the report of a licensed auto appraiser included with a diminished value claim. Why? Because auto appraisers pay attention to the details; they know the auto industry and the latest trends; and they have access to tools that help them assess damage and how skillfully repairs have been done.
There can be thousands of dollars in difference between what a diminished value estimator and a professional appraiser say a car is worth!
Don’t Take Chances!
Don’t let diminished value take you by surprise when you go to sell your vehicle! File a DV claim as soon after an accident as possible.
And if you’re going to go to the trouble of filing a diminished value claim, at least give yourself the best chance of recovering the maximum amount; get a detailed car appraisal from a diminished value expert like Auto Mediator!