Diminished Value Explained

Loss in market value, diminution of value, diminished value, depreciation, and lost value are some of the terms used to describe what happens to certain vehicles after they have been involved in an accident.

diminished valueMost consumers know that this type of loss happens, but they just don’t know how to properly document the loss, and there are very few insurance companies that will offer to calculate it for the consumer because that would just mean more money out of the insurance company’s pocket. When consumers search for help, they sometimes misspell the actual terms and come up with less than optimum help. It is not diminition of value, it has a “u” in it, hehe. I have seen such misspellings as demiciated value, depreciated value, diminishment of value, and depreciation of value. First off, spell it right, and you might come across some better resources!

Anyway, in almost every state in the U.S., it is possible to recover diminished value if certain circumstances exist. I will list out the most probable set of factors one must have in order to successfully recover diminished value but first, one must have a firm grasp on what diminished value is in order to properly document it for use in an actual claim, so let me first explain the different types of diminished value claims:

1. Repair related diminished value = the loss in value that a vehicle sustains due to improper or substandard work performed at a collision or repair facility.

Most repair shops will provide a written guarantee of their work, so this type of diminished value is becoming less and less available, and repair techniques and available repair tools are becoming more and more advanced. Additionally, unless a consumer is forced into using a specific repair facility (which is illegal in most states), it is a very hard type of claim to pursue. If there are terrible repairs, then the problem is between the consumer and the body shop, so it will likely require quite a bit of legwork and a professional to actually document the faulty repairs.

2. Estimate related diminished value = the loss in value that a vehicle sustains due to the manner a repair estimate is written.

This is not a super common type of diminished value, either, but it comes about when an appraiser or adjuster elects to write an estimate that includes things such as repairs when the part or component should have been replaced, or things like utilizing aftermarket parts that are not completely compatible with the subject vehicle. This kind of diminished value also requires special expertise in order to properly document.

3. Inherent diminished value = the loss in value that a vehicle sustains simply because it has been in a wreck.

Ask most anybody whether or not they would like to pay $5000.00 for a 1998 Honda Accord with 100,000 miles on it that has never been wrecked, or if they would like to pay $5000.00 for an identical 1998 Honda Accord that was involved in a wreck and repaired. I would be willing to bet that most people would opt for the vehicle that was never wrecked. There is just a stigma associated with a vehicle being in a wreck, you know? Unfortunately, even this type of diminished value will probably require an expert to document.

You can see that the easiest and most common type is an inherent diminished value claim that is pursuable, so when can you successfully recover this type of loss?

If the following factors apply to your claim, then it is probably worth it to hire a professional and have them write an official diminished value report:

1. The accident was not your fault.
2. The at fault party has insurance or you have uninsured motorist coverage.
3. Your vehicle is newer than a 2002 model vehicle.
4. The damage estimate was at least $2000.00.
5. Your car was not deemed a total loss.

download our free dv guideIf you have all five factors above, then you need to ask your adjuster to address the diminished value and go from there. Most likely, the adjuster will require that you make a formal demand for the claim.  If that happens, just write a letter (download our sample demand letter here) and ask the insurance company to pay you some amount of money for the diminished value. You could do some research, but if you are not a trained (and normally a license is required) adjuster the value you ask for won’t hold much water, so unless the company just offers up an acceptable amount, you need to find a specialist to write you a report.

The cost for a diminished value report can be up to $600.00, but you can find good specialists to write a report for far less (ours is $250) that will hold muster in front of a judge or jury. Do your research and find somebody that will talk to you over the phone and give you some assistance in preparing cover and counter letters or at the very least, somebody that will actually follow a methodology and not just provide you with a formula or have you fill out an online form. The specialist should be willing to testify in court on behalf of their report if needed and shouldn’t charge you an arm and a leg for that.  We charge mileage to and from the court and don’t charge for our time because we feel it is only right that we are there to support our report if you purchase it from us.