It is the curse of car owners in all 50 states – your car gets hit by an irresponsible driver and undergoes collision repairs. Your body shop did a good job but when you go to sell or trade it, a new reality sets in. Your vehicle has suffered Inherent Diminished Value. A car or truck that experienced structural damage or air bag deployment can lose close to half of its pre-accident value as a result. Even a minor impact can cause most cars to lose 10%-15%, as many of us have had the misfortune of learning.
There are several methodologies that purport to determine the existence and approximate amount of value that cars lose after being repaired. They range from fully-researched Auto Diminished Value Appraisals based on actual research – to the short cuts commonly known as formulas (Such as Rule 17-C), algorithms, online ad and book value comparisons. Each of these have shortcomings, primarily because they don’t reflect what you will experience in the real world.
Associating the difference between an NADA Average Trade-In Price and Rough Trade-In Price to determine diminished value is a simple comparison used by some insurance and independent auto appraisers. Regrettably, a car owner will learn that those amounts are far less than the numbers you’ll encounter.
Using online ad comparisons is even less substantial as evidence. Appraisers seek out similar cars being offered for sale online, cars that were previously repaired and those that were never wrecked. It’s not uncommon to find a high asking price for a car with a repair history. A dealer can test the waters but should their atypically high asking price be used as a measuring stick to establish your car’s loss in value?
Every formula and algorithm created not only exposes inaccuracies but each sets limits as to how little or how much various modifiers impact diminished value amounts. Take the example of a $40,000.00 car that suffered moderate structural damage and was repairable for $7,500.00. The relatively low repair amount will correspondingly instruct the algorithm to limit the percentage of value the car has lost. In the real world though, 100% of new car dealers will advise the prospective customer that the structural damage will lower the trade-in value by up to half. While the actual Inherent Diminished Value may be $15,000.00 – $20,000.00 on this car, the algorithm will likely limit the sum to the cost of the repair or even less.
Even in online articles written about Auto Diminished Value, incorrect and sometimes counterproductive misinformation can be found. A recent article named only a few of the states where a car-owner can make a claim for the diminished value of their car against the insurer of the responsible party. The result could be that consumers from the states that were omitted will presume that they have no standing. Some articles even advise car owners to seek out appraisers referred by insurance companies. Common sense tells us that is the last place one would look for a fair assessment of the car’s diminished value.
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