How Much Does a Car Depreciate After an Accident?

Car accidents can cause significant damage not only to your vehicle but also to its value. Even after repairs, a car that has been involved in an accident will often depreciate faster and fetch a lower price in the market compared to one with no accident history. Understanding how much a car depreciates after an accident is crucial, especially if you plan to sell or trade it in the future. We’ll explore how accidents impact vehicle depreciation, how to file a diminished value claim, and why hiring a personal injury lawyer can help protect your financial interests.

What Is Depreciation?

Depreciation refers to the loss in value of an asset over time. For cars, depreciation is a natural process that occurs due to factors such as mileage, wear and tear, age, and market demand. Typically, a car loses value the moment it is driven off the lot, and its value continues to decrease over time. On average, vehicles lose about 20% of their value within the first year and continue to depreciate at a slower rate in subsequent years.

Depreciation is an unavoidable reality for vehicle owners, but an accident can significantly accelerate this process. The value of a car post-accident will be less than it was pre-accident, even if it has been repaired to excellent condition.

How Does an Accident Affect a Car’s Value?

When a car is involved in an accident, it typically suffers an immediate depreciation. Even if the car is repaired to a like-new condition, its accident history can impact its resale or trade-in value. Dealerships and private buyers often check a car’s accident history using services like Carfax, and vehicles with reported accidents are usually considered less desirable.

Key factors that influence how much a car’s value decreases after an accident include:

• Severity of the Accident: Major accidents that cause significant damage to the structure or frame of the car will lead to greater depreciation than minor fender-benders.
• Quality of Repairs: Vehicles that are repaired using original equipment manufacturer (OEM) parts and certified mechanics may retain more value compared to those repaired with aftermarket parts or by uncertified shops.
• Pre-Accident Condition: The car’s condition before the accident also plays a role. A well-maintained vehicle in excellent condition will suffer greater depreciation after an accident than a car that was already in poor condition.

Diminished Value: Understanding Post-Accident Depreciation

Diminished value refers to the reduction in a vehicle’s market value after it has been involved in an accident, even if it has been fully repaired. This is because buyers are generally less willing to pay top dollar for a car that has been in an accident due to concerns about safety, reliability, and hidden damage.

There are three main types of diminished value:

1. Immediate Diminished Value: The reduction in the car’s resale value immediately after the accident, before repairs are completed.
2. Inherent Diminished Value: The most common type, refers to the loss in market value due to the accident history, even if repairs were done perfectly.
3. Repair-Related Diminished Value: This occurs when the repairs were not done properly or when non-OEM parts were used, reducing the vehicle’s overall quality and value.

For example, imagine you own a car worth $20,000 before the accident. After the accident and repairs, the car may be worth only $17,000 due to its accident history. The $3,000 difference is the inherent diminished value, and this loss can be recovered through a diminished value claim.

Calculating Depreciation After an Accident

Calculating the exact depreciation after an accident can be challenging because it depends on several factors such as the car’s make, model, age, pre-accident condition, and the severity of the damage. Some methods used to calculate diminished value include:

• The 17c Formula: This is a standard formula used by insurance companies to calculate diminished value. It starts with a base loss of value (typically 10% of the car’s pre-accident value) and adjusts based on factors such as damage severity and mileage.
• Appraisal Method: An independent appraiser can assess the vehicle post-accident and provide a more accurate estimate of its diminished value based on the repairs and current market conditions.

Regardless of the method used, it’s important to work with a professional to ensure that you’re getting an accurate and fair estimate of your vehicle’s post-accident depreciation.

Filing a Diminished Value Claim

If your vehicle has depreciated after an accident, you may be entitled to compensation through a diminished value claim. To file a claim, follow these steps:

1. Collect Documentation: Gather all necessary documentation, including the police report, repair estimates, invoices, and before-and-after photos of the vehicle. You may also need an independent appraisal to determine the exact diminished value.
2. File a Claim with the At-Fault Driver’s Insurance: In most cases, diminished value claims are filed with the at-fault driver’s insurance company. Present all your documentation, including the calculated diminished value, and request compensation for the loss in value.
3. Negotiate the Claim: Insurance companies may offer less than what your car is worth. Be prepared to negotiate and provide evidence to support your claim.
4. Hire a Lawyer: If the insurance company denies your claim or offers an unfair settlement, it’s time to consult a car accident lawyer who specializes in car accident cases. A lawyer can help you navigate the legal process and ensure that you receive the full amount of compensation you’re entitled to.

Depreciation with Different Types of Accidents

Not all accidents affect a car’s value equally. The type of accident, the extent of the damage, and the type of vehicle involved all influence how much a car will depreciate. For example:

• Minor Accidents: A small fender-bender may not cause significant depreciation, especially if the car is repaired quickly and properly.
• Severe Collisions: Major accidents that result in structural or frame damage can drastically reduce a car’s value, even after repairs.
• Frame vs. Cosmetic Damage: Cars that suffer frame damage are typically worth less than those that experience only cosmetic damage, as structural issues can affect the car’s safety and longevity.

Insurance Coverage and Depreciation

Not all insurance policies cover diminished value, so it’s important to know what your policy includes. Here’s how different types of insurance can affect your compensation for vehicle depreciation:

• Collision Coverage: This covers the cost of repairs to your vehicle after an accident, but it may not cover the diminished value. This coverage is typically used when you are at fault.
• Comprehensive Coverage: Pays for repairs if your car is damaged by events other than a collision, such as theft, vandalism, or natural disasters, but it might not cover diminished value.
• Uninsured Motorist Coverage: If the at-fault driver is uninsured or underinsured, this coverage can help pay for repairs and potentially for diminished value.

Maintaining Value After an Accident

While it’s impossible to prevent all depreciation after an accident, there are steps you can take to maintain your car’s value as much as possible:

• Use OEM Parts: Insist that your vehicle is repaired using original equipment manufacturer (OEM) parts rather than aftermarket parts, which may not meet the same standards.
• Choose Reputable Repair Shops: Have your vehicle repaired by certified professionals who are experienced in handling your specific make and model.
• Keep Maintenance Records: Maintain detailed records of all repairs and services performed on the vehicle. This documentation can help demonstrate the quality of care your vehicle has received.

Legal Considerations and Rights

If you’re struggling to get compensation for diminished value from the at-fault driver’s insurance, it’s time to consider legal action. In Texas, you have the right to file a diminished value claim, but insurance companies may try to minimize or deny these claims. Hiring a car accident attorney, like the team at the Law Offices of Michael J. Gopin, PLLC can help protect your rights and ensure you receive fair compensation.

Understand Diminished Value and Protect Your Financial Future

Car accidents can cause significant depreciation in your vehicle’s value, even after repairs. Understanding how diminished value works, how to file a claim, and what factors impact post-accident depreciation can help you recover the compensation you’re entitled to. If you’re facing challenges with your diminished value claim or any other car accident-related issues, contact the Law Offices of Michael J. Gopin, PLLC for a free consultation. Our experienced team of car accident lawyers is here to help you navigate the legal complexities and protect your financial future after an accident.

Michael J. Gopin

Michael J. Gopin has practiced law in El Paso since 1987. Even after more than 30 years, he still remembers his first jury case. It was two weeks after receiving his license, when he represented a person whose life had been forever changed after being blinded in a work-related incident...