What To Know About Diminished Auto Value And Auto Accidents
Posted on: 11 July 2018
Auto accidents and damage to automobiles is common. In fact, the entire auto insurance industry revolves around protecting your car and life. However, even when your car is totally repaired after an accident, it may lose value when it comes time to resell your car. If you are worried about diminished auto value because you've been in one or more accidents with a car you want to sell, check out these three facts you must know.
Diminished Value Is Not Depreciation
Don't confuse diminished value with depreciation. Depreciation is normal and happens to every car. New cars depreciate much faster than used cars. If you buy a used car, even if it has no accident history, you aren't sure if the previous owner hid accidents/major repairs, so the car is worth drastically less money simply because it isn't new. The problem with depreciation is that if the car gets totaled, the insurance carrier typically pays what the car is worth after major depreciation, not what you owe on the car loan.
The best way to prevent depreciation with a new car is to get gap insurance. However, gap insurance won't help you with diminished value. Diminished value isn't something that happens to every car. It only happens after a car has been in an accident. Once a car has been in an accident, buyers may not be willing to pay as much for the car. The only way to avoid this potential outcome is to avoid any accidents, even ones that aren't your own fault, which can often be impossible. Depending on the amount and severity of the accident/s, your car may drastically lose value.
There Are Different Types of Diminished Auto Value
There are multiple definitions of diminished value. The first is immediate diminished value. This simply refers to the difference between how much the car was worth (for resale or trade-in) prior to the accident compared to after the accident and repairs. Inherent diminished value is similar, but it is more perception than tangible value. Inherent diminished value assumes a car has been completely repaired to pre-accident condition. However, despite the car working fine, the accident affects how potential buyers view the car, and their perception is typically that a car with an accident is worth less.
The last type is repair-related diminished value. This refers to problems that may arise because of the repairs. For example, new paint covering a scratch may not perfectly match the rest of the car's color. Similarly, the mechanic may use generic parts instead of name-brand original parts, which can affect the overall value and how people perceive the automobile. Therefore, diminished auto value refers to both the actual value and the perceived value of the car.
You Can File a Diminished Value Insurance Claim
If you do get into an accident and fix your car, you may be able to file a diminished value insurance claim with your insurance provider. This claim is designed to compensate you for the money you lost due to the accident. Some states, however, do not allow diminished value insurance claims at all. The ones that do, however, look to see who caused the accident.
If you didn't cause the accident and your state allows insurance carriers to pay diminished value insurance claims, your claim may get approved. However, if you did cause the accident, it's less likely you'll get any reimbursement, especially without legal help. If a third party caused the accident, you may be able to sue them or file a claim with their insurer.
Getting into an accident is terrible, and finding out your car is worth less after the accident and repairs can be frustrating. Diminished auto insurance claims may be able to help, depending on where you live and who caused the accident. For more information about diminished auto value, contact a company like Chicago Auto Appraisers.
Share