What is Diminished Value?
When a vehicle is damaged in an accident, the insurance company pays to have the auto repaired. However, that accident repair is permanently recorded in online databases like CarFax. When you sell your car, buyers will see the repair history and that will significantly reduce its selling price. In other words, Diminished Value is the difference between what your auto was worth before the accident vs after the repair. Diminished Value is considered a financial loss.
To help you understand your car’s diminished value, let's take a trip to the local car dealership:
You're ready to buy a car and you’ve decided on the particular model you want. You find two of those cars sitting side by side on the dealer's lot. The 2 cars are identical, but then you learn that one of them was in an accident and required substantial repairs. The sales person assures you that both are as good as new. Would you be willing to pay the same amount for a car that was in an accident?
In a recent survey of potential buyers,
43% of the buyers would not buy an auto that was in an accident
42% of the buyers would only buy a car that was in an accident, if it was significantly discounted
Dealers understand their customer’s reluctance to buy a repaired vehicle. That’s why auto dealers routinely discount autos that were in an accident 15% to 50%. Many dealers feel that it hurts their reputation to have autos with an accident history on their lot, so they send those autos to auction.
Can I be reimbursed for Diminished Value?
The good news is that North Carolina is one of 8 states who automatically insures its residents against Diminished Value. Diminished Value coverage is in the Liability section of every auto insurance policy written in North Carolina, so you automatically pay for that coverage as well. To make a Diminished Value claim, the accident must be the other driver’s fault.
In addition, you can claim diminished value as financial loss on your Federal tax return. Use IRS Form 4684 to deduct the part of the loss not reimbursed by the insurance company. The cost of the auto appraisal can be deducted as well.
The amount of diminished value depends upon 3 factors:
A significant accident will cause much more diminished value than a minor accident. Key factors are the cost of the repairs, any structural damage, and the overall percentage of the car that was repaired, etc.
A late model premium car can suffer more diminished value. For example, a Mercedes that is less than 4 years old will likely suffer more diminished value than a 10 year old KIA.
A low quality repair will increase the diminished value. For example, use of non-OEM parts, water leaks, squeaks, rattles, electrical system problems, etc.
And now for some shameless self-promotion...
Auto Appraisal Carolinas is your local diminished value appraisal professional. Our network of appraisers attend auto auctions nationwide to gather information on over 140,000 auto sales each month. We then compare the sale price of vehicles that were in an accident to the sale price of accident free vehicles. This real world comparison gives us a strong case to set a Diminished Value for your car that will stand up to insurance company scrutiny.
