What is Diminished Value???

• A vehicle's market value can decrease even if it's restored after an accident.
• A vehicle's accident history will appear on CARFAX and other reports, which can reduce its market value.
• Potential buyers will be less likely to pay top dollar for a car with an accident history.

• You can file a diminished value claim with your insurance company or the other driver's insurer.
• The claim can help recover some of the lost value when you sell or trade in the vehicle.

• Inherent diminished value: The loss in value that occurs after an accident, assuming the vehicle was repaired properly.
• Repair-related diminished value: The loss in value that occurs when a vehicle is repaired improperly

• The mileage of the vehicle can affect the diminished value.
• Older vehicles that have been driven more lose value less than new ones.
• Vehicles with multiple accidents will be adversely affected

A more simplistic analogy used to describe diminished value is the term “refurbished”. The definition of “refurbished” = To rebuild or replenish with new material; to restore to original (better) working order and appearance.

Your car has been damaged and has been put back together in, hopefully “good as new” form.  Here is the problem…no two vehicles will ever be hit in the same exact spot, with the same amount of force.  The force, angle and point of impact determine the severity of the damage which is simply described by vehicle history reporting sources like CarFax and Experian AutoCheck as follows:

• Minor Damage
• Moderate Damage
• Severe Damage

There could also be comments on the VHR (Vehicle History Report) that further describe whether the vehicle was towed from the scene or was “functional”. If the vehicle sustained functional damage, it was not operating as designed and most likely undrivable. Descriptions typically used by municipalities (Law Enforcement Officers and First Responders) in the VHR World are somewhat standardized. These comments, however, can be highly detrimental if ad-libbed and will weigh heavily on re-sale value. Here are some of the terms we have seen utilized over the years:

• Vehicle totally destroyed
• Vehicle rolled over multiple times
• Vehicle towed from scene in sections
• Completely destroyed vehicle
• Sideswipe collision

Diminished Value is real and emotions – specifically FEAR is what drives most buyers away from a vehicle with tarnished history. Less buyers means less demand for the asset and less demand means a lower price. You can argue against it, but the person with the check book makes the rules and they simply don’t have to buy a car that was wrecked. They can buy another car without accident history.

A vehicle with severe damage is very undesirable to potential buyers – even if repaired perfectly to commercial standards. This ominous feeling of concern about the vehicle’s history eliminates potential buyers that can’t reconcile purchasing a vehicle with a checkered past. Interestingly, some buyers would consider buying a vehicle with severe collision damage but will want a very large price discount for taking a chance on the vehicle. This describes the emotional process the buyer goes through before purchasing a previously wrecked vehicle. Factor in multiple accidents and the expectant discount will increase. There is no avoiding Diminished Value – it is very real and a financial problem that costs consumers billions of dollars per year. Just how big a problem is it? Information from LexisNexis in 2024 shows that 14 million vehicle accidents are reported per year, creating over $480B in claims. All 14 million of these vehicles will have inherent diminished value ranging from 10-30% based on the severity of the collision damage. Conservatively, if you assigned a very modest diminished value claim amount of $1,500 you have a $21B problem!