Types Of Car Diminished Value Claims And How They Are Calculated
Car diminished value refers to a loss in value of your car resulting from an accident. Basically, it is the difference in your car’s market value before and after an accident occurs.
Types of Car Diminished Value
There are different types of car diminished value, and they are highlighted below
- Inherent Diminished Value
This loss in value arises from the mere fact that a car has been in an accident. Thus, even if the car was restored to perfect working conditions, it would still worth less than the expected amount.
- Instantaneous Diminished Value
This loss in value is calculated immediately after an accident occurs and prior to any repairs are carried out.
- Repair-Related Diminished Value
Sometimes, repairs are not made optimally, thus making the car still worth less after the inherent diminished value has been accounted for. The additional loss in value is termed repair-related diminished value.
How to Calculate Diminished Value
You might have been in an accident and want to find out what you are entitled to from the at-fault insurance party. Follow the steps below carefully and you should have an idea
Step 1: Find Out the Value of Your Car
This means you should determine what the fair market value of your car was prior to the accident. A professional appraiser can help you with an accurate figure.
Step 2: Find the Base Loss of Value
After you’ve successfully determined the fair market value of your car, find 10% of that value. The 10% represents the maximum amount that the insurance company would pay to you. It is also known as the base loss of value.
Step 3: Apply A Damage Multiplier.
You need to choose a damage multiplier based on the extent of damage your car has suffered and multiply it by the value derived in step 2. This would give you an adjusted base loss of value. Stated below are the multiplier rates
1.00 – severe structural damage
0.75 – major damage to structure and panel
0.50 – moderate damage to structure and panel
0.25 – minor damage to structure and panel
0.00 – no structural damage or replaced panels.
Step 4: Apply A Mileage Multiplier
Just like the diminished value multiplier stated above, the mileage multiplier ranges from 1.00 and 0.00. The multiplier depends on the number of miles on the car’s odometer. The higher the miles the lower the multiplier. As such, older cars get a lower multiplier.
Since the mileage multiplier will be multiplied by the adjusted base loss of value in step 3, it follows that older cars generally have a lower adjusted base loss of value. Below are the multiplier rates
1.00 – 0 – 19,999 miles
0.80 – 20,000 – 29,999 miles
0.60 – 40,000 – 59,999 miles
0.40 – 60,000 – 79,999 miles
0.20 – 80,000 – 99,999 miles
0.00 – 100,000 miles or more
It is noteworthy that filing for diminished value claims can be a very difficult process. if your car’s worth is significantly reduced after the repairs have been carried out though, it might be worth the trouble to do so.