Value After An Accident Demystified

two cars crash

Value after an accident. It’s a formula clouded in mystery, that insurance companies try to prevent from getting out. Luckily you can find anything on the internet. 

We now know how to figure out exactly how much your car really loses in value in an accident, and spoiler it’s a lot more than just money.

How much value does a car lose after an accident?

Insurance companies will value cars differently based on their own proprietary formulas, but will arrive at a number called the actual cash value to start the determination of what your vehicle is worth. 

The actual cash value of your car will depend on a multitude of factors but in general is the market value of your car (based on like-kind vehicle sales) minus your deductible. 

Companies may include things such as wear, age, mileage, and marketplace as factors in this determination. Once the actual cash value has been realized companies will calculate the damage done in your accident. 

Parts, Labor, and reduction of resale value all play a determining factor and can be broken down into further parts known as diminished values.

Diminished value

According to Dictionary.com when something is diminished it is reduced or lessened; made smaller. That is exactly what happens to the value of your car after an accident. 

The exact way to determine it is part research and part discretion. Meaning, that companies will research and determine values for fixed things such as parts, and labor but will use their discretion on what they deem is necessary. 

Discretion as you know is variable but some known things that will affect your value are original vs aftermarket parts, labor times and quality, rarity and demand in the market for your vehicle.

Beyond that, there are different categories of diminished value after an accident and they are broken down as follows:

Immediate diminished value

Immediate diminished value is the amount your car is worth directly after your accident before repairs. In other words, take your car’s market value and subtract what you think the damage repair will cost including parts and labor and add an additional 15-25% reduction for a tarnished record. That’s what your car is worth as it sits.

After Repair Diminished Value

After repair, diminished value is exactly what it sounds like. Taking the immediate diminished value of your car and calculating what it would cost to complete all repairs including labor to bring it back to its original condition.

Add a 15-25% reduction because a tarnished record still applies. To get a more accurate number for your particular car, finding other accident repaired car sales would be the best method. 

Insufficient Repair Diminished Value

man in black suit standing beside red car value after an accident
Repairing A Car In The Bodyshop

An insufficient repair diminished value is derived when a car is repaired incorrectly or using substandard parts. For instance if there is shoddy repair work like mismatched or peeling paint the vehicle will be worth less in its after repair value. 

Using aftermarket parts instead of OEM (original equipment manufacturer), particularly in the case of high end or exotic cars, will also considerably lower the cars after repair value. To see what makes high end cars so complex to repair correctly, see what makes them so special in the first place here.

Non OEM parts may not  be manufactured to the same specifications as the original and that can adversely affect fit, finish, and even function of the repairs.

Will My Car Ever Be The Same After An Accident?

Even if your car is repaired at the factory, and every single part is replaced with a new one, your car will  ever be the same after an accident.

Let me explain further. If a repair is performed flawlessly at best your car will drive as good as new. That may be all that’s important if you never plan on selling. However, in the resale world your car will forever be lesser. 

Reported accidents permanently lower your vehicle’s desirability in comparison to ones that have not. It’s just the way the world works. 

An accident is a blemish that will never go away generally unless you perform some highly illegal and frowned upon methods to conceal its history. At that point, the value after an accident is the least of your concerns. 

Should I Buy A Car That’s Been In An Accident?

Buying a car with accident history really is dependent on its condition, repair quality, and extent of damages. 

If you know the history of its accident, and can confirm the repairs were made by a competent facility using the correct parts, buying a car with an accident history doesn’t have to be all bad. You may be able to buy a perfectly functioning and appearing vehicle for a discount.

However, it is seldom you will find a vehicle that has a full accident history report as well as the damage repair. Generally cars are repaired to a budget. The nature of capitalism as it is, the work sometimes falls short of what’s required.

Furthermore, even if everything was done well, accelerated wear and maintenance issues could arise later as a result of the accident leaving you with unplanned issues.

Lastly, if resale is a major deciding factor in your car purchase, be aware that cars with accidents in their history will depreciate faster. This will bring lower resale should you decide to sell.

In Sum

The value after an accident of a vehicle is more than just a number. It really represents what you value out of a vehicle. To insurance companies its numbers, how much now vs how much then. It may mean that to you if resale value is a concern. 

If quality and performance are more important, value is dependent on how well it functions now as to how it did prior. Is my vehicle safe and functioning as it should?

Maybe all these are important to you. So what do you think about the value of a car after an accident?

Related posts