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Diminished Value

Sanjib Saha

A CRUCIAL STEP WHEN buying a preowned car is to scrutinize its Carfax report. A single-owner car with a regular maintenance history and which was driven solely for personal use should be a safe bet, while an accident record gives most people pause. All things being equal, a car that was in an accident, however minor, ought to cost less than a similar one with a clean history.

Some bargain hunters don’t mind taking a chance on a car with an accident history as long as it drives well. After all, the discount can be quite attractive. This might seem unfair for a seller who wasn’t at fault for the accident. Even if the car was repaired to perfection and the tab was picked by the other party’s insurance, how does the owner recover the value lost? A recent accident forced us to find out the answer.

We flew across the country to spend the Labor Day week with my brother-in-law. While driving us around in his almost-new car, he was rear-ended by a pickup truck. Thankfully, no one was hurt, and the car was still drivable. The pickup’s apologetic driver accepted fault and assured us that his insurance would cover all repairs. Still, we worried about the car’s market value.

It turns out that my brother-in-law can recoup some of the loss through a diminished value claim. First, he needs to get a fair estimate of the loss of market value due to the accident. This might involve researching prices of similar used cars with and without an accident history, or even getting a free estimate.

Next, he must contact the other driver’s insurance company and specifically request diminished value compensation. This amount would be on top of the repair and rental costs. The claim should be made in a timely manner and backed by the necessary documentation.

The insurance company will likely reduce the compensation amount. For example, if the pre-accident value of a low-mileage car that suffered severe damage was $25,000, the insurance company might cough up $2,500 at most. It’d likely be far less if the damage is moderate or the car has higher mileage. Paying a few hundred dollars for a written estimate from a licensed appraiser may increase the odds of fair compensation.

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