Diminished Value

Diminished value generally occurs when a client's vehicle suffers substantial damage through the fault of another driver and no fault of their own. Diminished value is more common on a late model high end luxury automobile, however it can and does occur in lower end late model vehicles.

Diminished value can occur for a number of reasons. The automotive insurance industry can have the vehicle repaired if the cost of the repair is less than 75% of that vehicle's value. In order to meet this condition automotive body repair shops must work quickly and sometimes might cut corners to be able to get the job done and keep the cost at an acceptable level. Another way in which diminished value can occur, is the situation where the insurer requests, or the repairer installs non original replacement parts on the vehicle. These parts may be significantly less expensive, however their fit and function may be inferior to the original manufacturer's equipment.

The end result of the repair of a vehicle in this nature is one that does not meet the same safety standards as a like kind and quality undamaged comparative vehicle. It may also suffer in comparison due to subtle differences in appearance from factory fit and finish.

Another consideration is the fact that the popular Certified  Preowned auto dealers will not find this a desirable vehicle to offer for sale. The NC Department of Insurance requires that owners selling a used automobile must disclose any damages that occur to the vehicle over 25% of the vehicle's value.

The calculable amount of diminished value will depend upon a number of factors.

  • The method of accomplishing the repair.
  • Extent and nature of the damage.
  • The finished appearance of the repair.

The automobile market is vulnerable to the commonly held consumer perception that in the situation where two identical vehicle's exist, the one that has not been previously damaged and repaired is more desirable, and consequently worth more than the previously damaged repaired one.

The diminished value condition is recognized and mentioned on the declarations page of most insurance policies. It must be calculated and determined on an individual case by case basis, no two accidents are identical.

Finally it is most beneficial to document by invoice as well as by photograph as much as possible the extent of damage, method of repair of the damaged vehicle. This is all helpful to the appraiser in determining the amount of diminished value if any exists.

For more information about what is and is not included in an appraisal, click here.