More than 6 million passenger car accidents happen annually in the United States. And the sheer number of accidents clearly shows that even the most careful and attentive drivers aren't protected from getting in an accident at some point in their lives.
But while most accidents tend not to be too serious in terms of injuries, they are still a big nuisance that can cause significant damage to a vehicle and its value.
And that's why every driver needs to be able to calculate car value after accident, after evaluating whether there's only minor damage or if the repair cost will be higher.
But how to calculate car value after it's no longer in its original condition? And what does diminished value mean, anyway?
Let's explore these and other important questions below.
What is Diminished Value?
A crucial part of learning how to calculate car value after an accident is understanding how its value changes and why. And that's where the term diminished value comes into play.
It describes the difference in the car's value for potential buyers before and after the accident. In other words, it evaluates how much the same vehicle would cost without an accident history and after suffering structural damage.
When figuring out what to do with a damaged car, the diminished value calculation will be an essential factor that will help you make an informed decision based on the extent of the damage, previous accidents the car has suffered, your insurance policy state insurance laws, and whether you are ready to buy a new car post-accident.
Your insurance company will also be interested in the car's diminished value calculation. That's because, in some cases, the auto insurance will compensate not just the accident victim's car repair but also the difference in the diminished value that happened because of the accident.
The key thing to note here is that this only applies when the accident is caused by the other driver. If you are the at-fault driver, your diminished value claim will not be accepted by insurance companies in most states.
If you are eligible to be compensated for the damage that reduced your car's value, you will need a calculation that allows you to determine how much your car has depreciated. As a starting point when learning how to calculate car value, you can use the Kelley Blue Book to estimate how much your car was worth before the accident. Then, you'll need to apply the damage multiplier and mileage multiplier to come up with the maximum number that the insurance company will pay out for your diminished value claim.
Why Your Car Loses Value After an Accident
It's obvious that a car's value will go down after it suffers severe damage in an accident. Repair-related diminished value makes sense because the new owner would have to deal with the issues before they can return to the road with the vehicle.
But unfortunately, even a fully repaired car with a history of damage will usually be worth significantly less than a similar vehicle that has never been in an accident.
And there are a few reasons why that's the case, which you should be aware of so that you can make an educated choice about what to do with your car and for how much to sell it if you decide to go in that direction.
Let's look at the main reasons your car value after accident goes down.
Not all accidents will have an equal impact on the car's value. Even though the vehicle history will state that a car has been in an accident, the severity of the damage and whether there's damage to the structure will play a deciding role in how much the value will ultimately diminish.
For example, if your car has been in a minor accident that resulted in little external damage, such as a dent or scratch, that will typically have a minor impact on how much you can sell the car for. These types of accidents don't cause any structural damage or internal issues, and the aesthetic problems can be repaired relatively cheaply and in a way that leaves no trace of anything happening.
If the accident is more serious, the car will often suffer damage to the structure, which is something that can cause permanent problems if the owner opts for low-quality repairs. When the chassis is damaged, the factory frame specifications get knocked off, which can cause various issues. The structure can be restored to the original manufacturer specifications by a technician with the right skills, but it is a complex process that doesn't always get done right, especially if the damage to the motor vehicle is extensive.
Finally, if the car suffers from damage to vital internal components, such as the engine or transmission, it is not only the most expensive to fix but will also devalue the car the most.
The Specific Car
Even if two cars suffer identical damage in an accident, that doesn't necessarily mean they will both diminish in value the same. That's because the diminishing value also depends on how old the car is, what make or model it has, the mileage it has, and the demand for that car in the market.
If you have a newer car that's also still in demand, that will usually make it more worthwhile to repair it. And you will also have an easier time finding buyers who might buy it as is for a reasonable price. Just like when determining the scrap value of a car, its make and model will play a role together with a few other vital factors.
And if the car is older and has a long vehicle history report, as well as higher mileage, that will usually result in your car's value going down. However, if you hire a repair shop that has experience in bodywork and in repairing structural and internal damage, you can usually find a private buyer who will see the value of the repairs you have made and be willing to pay a fair market price for the car in its current condition.
The quality of the repairs can make a big difference in how much future buyers will pay for your damaged car. Because of how the claims process is structured, car owners often don't always receive enough to fix the problems properly and are forced to cut corners.
That may mean making repairs with used parts or not fixing external issues in a way that looks good aesthetically.
If the repair shop you worked with did a poor job fixing your car, that will further diminish the value, making the car even harder to sell for the price you want. You may not even be able to generate attention for your car in the private market.
The good news is that you can always work with a reputable junk car buyer who will offer a fair price for any car, even if it has been in a recent fender bender or suffered serious accident damage that requires expensive vehicle repairs.
How to Calculate Your Car's Diminished Value
Learning how to calculate car value after an accident is actually fairly simple. But in order to do it correctly, you will need to know the type of damage that was done, which will need to be evaluated by a mechanic.
The first part of the calculation involves your car's value before the accident. As mentioned before, you'll need to look at the Kelly Blue Book and find out how much value your car's make, model, and year currently has in the market. This is the base number that will help you understand the maximum amount you can get, as insurance companies will only pay out a maximum of 10% of your car's original value for your diminished value claim.
Then, you'll need to apply the damage modifier to your calculations. If there's no structural damage, the modifier is 1. But if you have minor structural damage (0.25), moderate structural damage (0.5), or major structural damage (0.75), the modifier number will be used to multiply against your original 10% amount, which will reduce by 25-75%.
Finally, you'll need to use the mileage modifier, which will also reduce the diminished value amount you can get if your car has higher mileage. Up to 20,000 miles, the modifier doesn't apply. But for each additional 20,000 miles, the modifier decreases by 0.2, until eventually reducing the amount you can get to $0 if your car has over 100,000 miles.
Even a relatively minor accident can take thousands of dollars off your car's value. And if you have a more serious accident, you may need to start looking at the salvage value of your car after it's all said and done. But knowing how to calculate car value after an accident will at least help you stay informed of what you can expect to get.
And the good news is that when you work with a reputable junk car buyer like Orthodox Auto, you can at least be confident that you will get a fair assessment and a good offer for whatever condition your car might be in. And then, you can enjoy a convenient and fast process that will allow you to get cash for your vehicle in no time.