Diminished Value

Would you buy a vehicle that has been in an accident? Chances are you wouldn’t, because you know that a car is worth significantly less after it’s been in an accident—even if it was repaired by a professional mechanic. This is called diminished value, and it’s a real concern among consumers whose vehicles have been damaged and repaired due to another driver’s negligence. The accident history of a car involved in a collision significantly decreases it’s value and often presents safety issues.

Diminished value is the difference between the market value of a car prior to a collision and its reduced value after an accident and subsequent repair. While insurance policies in most states guarantee that a car will be repaired to pre-accident condition, the reality is that this isn’t always possible. Unlike vehicles made in earlier times, the modern “Unibody” vehicle is a complex frame system manufactured to specific Federal safety standards and features including “crumple zones” tested to precise specifications using precision equipment and techniques that cannot be duplicated by any “repair shop.” Welding heats and then cools the metal which compromises the crumple zones. As metal become brittle, it can crack instead of crumple jeopardizing the safety of occupants. “Crumple zones” are designed for one impact. A modern unibody vehicle that has sustained frame and structural damage simply cannot be repaired back to the same quality as when the car left the factory.

Other factors related to vehicles that have sustained serious damage which have not been restored to “original pre-accident” condition include the voiding of a factory warranty, the type of replacement parts used to repair the vehicle, especially in hidden areas, increased likelihood of mechanical failure, undiscovered damage, failure of bearings, seals and electrical components, and paint that not age or wear in a similar manner to factory paint, the inability of the vehicle to be sold under a manufacturer’s “Certified Pre-Owned” program, and the lack of post-repair testing with respect to safety.

If your car has sustained substantial damage in an accident and been repaired you are entitled to compensation for the diminution of value from the responsible driver’s insurer. The International Society of Automotive Appraisers uses a standard sliding scale which ranges from 10% to 65% for “Inherent Diminished Value” (i.e. accident history or “stigma” damage).  Inherent Diminished Value is defined as the amount by which the resale value of a repaired vehicle has been reduced solely as a consequence of the vehicle now having significant damage history. The fact that a vehicle has a damage history decreases the overall market value of the vehicle. Inherent Diminished Value does not take into consideration any additional loss of the vehicle value due to claim related or repair related diminished value.

Sometimes consumers opt to unload a vehicle by selling it without disclosing the accident history. The consequences can be serious. A seller who conceals or suppresses the fact that a vehicle has sustained structural damage from an unsuspecting purchaser can be criminally and civilly liable for damages for such fraudulent conduct. A seller is obligated both legally and morally to disclose such material facts to a buyer and cannot conceal or suppress the information in order to obtain more money from an unsuspecting buyer through false pretenses. A seller who fails to disclose a vehicle has sustained structural damage may be liable not only for actual damages, but also for “punitive damages” as well as “triple damages” and “attorney fees.”

It’s estimated that 55 percent of consumers would not buy a vehicle damaged in a car accident and 81 percent of those who would buy a damaged vehicle would only do so if offered deep discounts.

Savvy car buyers consult car history reports obtained from services like CARFAX, which provides a full report of the vehicle’s history and allows them to buy without the fear of hidden problems. Without the protection of a history report, consumers may purchase a vehicle that has been in a serious accident. A recent 20/20 segment recently revealed that even reputable dealers like CarMax fail to disclose information about safety, repairs and recalls to consumers.

As demand for diminished value recovery grows, reputable vehicle appraisers are becoming increasingly committed to providing a variety of consumer protections. These include providing customers with post-collision vehicle inspections, as well as a number of related services like collision monitoring, pre- and post-purchase inspections, total loss and diminished value assessments.

In California, damages for diminished value can only be recovered against the party who negligently damages your car; diminished value is not recoverable against your own Collision Coverage except in very limited circumstances.

Another limitation on diminished value damages in California is that your recovery is limited to the vehicle’s fair market value prior to the accident, minus the cost of repairs. For example, if your vehicle’s fair market value before the accident is $25,000, and the cost of repairs is $15,000, your recovery for diminished value is limited to $10,000. This is true even if your actual diminished value appraisal is much greater.

If you’ve been in an accident that occurred because of someone else’s negligence, and you’re worried about dealing with insurance companies undervaluing your case, contact us, your personal injury attorneys in Orange County. We’ll work with you to recover as much of your vehicle’s diminished value as possible.

Contact us if your vehicle is damaged in a collision due to someone else’s negligence and you wish to learn more about recovering your vehicle’s Diminished Value.

Free evaluation of diminished value claim.