Diminished Value can be defined as the loss in value a vehicle suffers after an accident and followed by repairs. When a vehicle gets into an accident and is damaged, it loses its value even though it is repaired and is road worthy again. This vehicle can never have the same value as it was before the accident. This concept applies anything that is damaged or suffered injury. Auto Insurance companies have been in the practice of putting to good use the term ‘Diminished Value’ for decades.
Recent studies show that 43% of people surveyed would avoid buying a car that has been an accident. It at all they buy such a car they would go for the one which comes at a deep discount. According to a study conducted by AAG, the car dealers diminished the car’s value by 10 to 50 percent for having been involved in an accident. Even though the car is repaired properly, the car will be getting a lesser value due to the general belief that cars loose their value after they have been in an accident. This is known as inherent diminished value. For vehicles that had not been repaired to industry standards and need further repairs, they will have a repair related diminished value.
The difference between your vehicles’s worth before the accident and after being in an accident and repair is the diminished value. Diminished value is of three different categories namely the inherent diminished value, shop related diminished value and insurance related diminished value.
Inherent diminished value
It is general belief that the value of a car that has met with an accident and been repaired is not the same as it was before the accident. This is because the general opinion is that the car loses its original value when it is damaged and repaired which is known as the inherent loss of value. The reduced value is called the inherent diminished value.
Repair related diminished value
When a car gets damaged in an accident and is repaired, its value is less than what it was worth before the damage. But if the repairs are not adequate or not done to industry standards requiring further work, this loss of value is categorized as repair related diminished value.
Insurance related diminished value
When claims adjusters of insurance companies leave out any repairs caused by an accident either intentionally or unintentionally, the settlement amount would be affected negatively. There may also be times insurance related diminished value occurs when the repair shops were not paid adequately to carry out the requisite repairs on a car damaged in an accident. When the spare parts fitted are poor fitting and substandard, it will cause insurance related diminished value because insurers find that original parts (OEM parts from the manufacturer) are not used.
To collect your claim amount for diminished value you will carry the burden of proof. Some people prefer a quick solution and would forgo the diminished value and set it off against their income tax with proper documentation to substantiate the loss. If you persist and can prove the loss you stand a good chance of getting paid.