Six Things That Will Hurt the Value of Your Diminished Value Claim

Claim your diminished value after a front end wreck

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Here are 6 Things that will hurt the value of your Diminished Value Claim:

  1. Technically, every car has a market value, even older cars in poor condition can be sold for something. In practice, the insurance companies do not see it that way for diminished value claims. Most insurance companies will put up a big fight towards paying out on a diminished value claim if the car is more than seven years old. From their financial calculation the diminished value on an older vehicle, less likely to be worth very much on the used car market, is not likely to be worth enough to take the claim to trial so the financial benefit to the insurance company to settle those claims is less than a newer car which likely has retained more of its value. There is a certain logic to this position. Older cars are usually worth less than newer cars. If your car is only worth $3,000 and the diminished value from a car wreck is (unlikely) as much as $1000 that may not get you very far in the legal system. Filing a case in the county or district courts with service is almost $500 itself and you won’t recover that money. That means you are likely going into the Justice of the Peace court, which is cheaper to get into but usually a less effective legal option. What insurance companies do wrong is to take their arbitrary age cap and use it to draw a line in the sand. Older cars are not necessarily in poor condition or without market value. This is particularly true with older luxury and high end vehicles, older cars with low mileage, older commercial vehicles and older cars in great shape.
  2. The mileage on your vehicle. Just like when you buy or sell a car, you know the mileage has a big impact on the market value of a given vehicle. Most people consider cars with low mileage better value than a car with greater mileage because more mileage means more wear which means more repairs in the near future. Again, this is a very logical reason why one diminished value claim might be worth more or less than the next. Although in their usual fashion, the insurance companies draw a line in the sand based on mileage. Many insurance companies insist they will not pay a diminished value claim on a vehicle with more than 100,000 miles on it. You canrecover diminished value on a car with more than 100,000 miles but you may have to get yourself in that JP court to make your claim worthwhile. The mileage issue is more difficult to overcome because even the average consumer sees 100,000 as a major threshold in the future of a car and the increasing need for repairs. However, it is not a hard line like the insurance companies will have you believe. A car with 100,000 miles that has an excellent service record (and provable record) can command more value than a car over 100,000 with little service performed because that means a lot of emergency service is probable on that vehicle in the near future. Some cars also stand the test of mileage, particularly certain import brands. Those issues can be key negotiation points.
  3. The make and model of your car. We’re getting more obvious here. A BMW is worth more than a Kia. It’s going to command a higher price on the market despite Kia’s improved image and quality. A car that started out more expensive and holds value longer in the used car market is going to have a greater diminished value, all other things being equal, than a car that started at a lower price point and sells for less on the used car market.
  4. Where you live.Where you live also plays a role in the value of your car on the used car market. Cars in urban areas tend to command a higher market value over cars in rural areas because the overall cost of everything is more in urban areas and the used car market usually has greater demand. A car in Fort Worth usually will have a higher resale price than the same car being sold in San Angelo. Even among neighborhoods the market value of a car can change. That same car for sale in Hurst may have a slightly lower market value than what it may go for in Plano or Southlake. The importance of the location of the vehicle should not be overlooked. Any good diminished value appraisal should include obtaining the sale price of similar vehicles around the same area where your car resides as part of the process of determining the diminished value on your car. It is a useful way to prove how the local market raises (or lowers) the value of your vehicle against the national standards set in broader pricing schedules, such as N.A.D.A. or Edmunds.
  5. Prior accident history. A car with two accidents in its history is usually going to be worth less than a car with one accident. That makes sense, right? It would seem so, although there is not a clear consensus on how people value the difference between one accident and multiple accidents. Certainly a good argument can be made that a car that has had severe body and mechanical damage from two accidents might be worth less than a car that had one serious wreck and repair and one minor repair, such as a replaced bumper. Again we will get back into the insurance company drawing a line in the sand. I have heard more than one claims adjuster say they will not pay out on diminished value claims on any accident after the first that appears in the car’s accident history. It’s not necessarily the case that there is no additional diminished value on the second accident but the insurance company is taking a stand based on the financial analysis. It is going to be more expensive to litigate a diminished value claim where the loss from the first accident has to be calculated and removed from the diminished value caused by the second accident–and get a jury to understand that analysis–and chances are the lost value from the second accident is going to be small enough that it isn’t worth paying a lawyer plus experts to get to verdict. With that in mind the insurance companies know they can usually scare you off of a claim on that later accident. It should also be said if you are driving a vehicle with a salvage title it will be nearly impossible to convince an insurer to pay on diminished value. Salvage vehicles are already so low in value on the market that whatever diminished value claim you have may be difficult to prove (since the car already has an accident history) and likely will not be worth the cost of litigation. That is true even if you are driving a very nice vehicle with a salvage title. However, that doesn’t mean it can’t be done or that it shouldn’t be attempted.
  6. Not understanding the value of your claim. Not understanding the full value of your diminished value claim itself is a self-fulfilling loss of value. If you undervalue your claim to the insurance company than they are already starting off from a superior negotiating position because you have started the process by giving yourself a discount on the value of your claim. If your claim could be worth $5,000 but you tell the insurance company you will settle for $3,000 then you have given up 40% of the potential value of your claim just by how you presented your claim. That’s a $2,000 mistake. A common way people undervalue their claims is by using these online diminished value calculators, which typically undervalue claims. A diminished value claim takes into account more than just the age, mileage and model of your car, but those are usually the major factors used in the online calculators. A qualified vehicle appraiser is far better at giving you an accurate, although sometimes overvalued, appraisal of your diminished value claim.