How to calculate the diminished value of your car

Your car’s diminished value is the depreciation in your car’s worth after an accident. If your car’s been in an accident, it can negatively affect its value — even if your car’s been repaired and shows no signs of damage.

How to calculate your car’s diminished value

The most widely accepted method for calculating diminished value is the 17c formula. Most insurance providers favor this method, but keep in mind that it’s not universal.

1. Determine your car’s value pre-accident. The easiest way to do this is to use either the Kelley Blue Book or NADA online calculator.

2. Apply a 10% cap. Insurance companies assume your car won’t depreciate by more than 10%, so we start with this number and apply multipliers to decide the final percent change.

3. Apply a damage multiplier. The insurance company will assess the damage to your car and apply a number from zero to one indicating the severity of the damage.

• 1.00 = Severe structural damage
• 0.75 = Major damage to structure and panels
• 0.50 = Moderate damage to structure and panels
• 0.25 = Minor damage to structure and panels
• 0.00 = No structural damage or replaced panels

This range can include any number from zero to one, not just increments of 0.25. This number is multiplied by the 10% cap.

4. Apply a mileage multiplier. Your car’s value is further adjusted to reflect the car’s mileage.

• 1.0 = 0–19,999 miles
• 0.8 = 20,000–39,999 miles
• 0.6 = 40,000–59,999 miles
• 0.4 = 60,000–79,999 miles
• 0.2 = 80,000–99.999 miles
• 0.0 = 100,000+

For example, if your car has 25,000 miles on it, you’ll multiply your adjusted value for damages by 0.8.

What does the damage multiplier mean?

The biggest difference between minor and major damage is whether the damage affected the car’s integrity or structural support. For example, minor damage might be only on the surface, such as scratched bumper paint or a dented door. Major damage typically involves replacing the whole piece or could affect the car’s safety, such as damage to the car hood or airbags.

Your insurance adjuster sets the damage multiplier based on how much damage your car took. Here are some examples of minor to severe damage.

• 1.00 = Severe structural damage. Destroyed frame or windshield pillars, rollover damage
• 0.75 = Major damage to structure and panels. Broken frame, bent axles
• 0.50 = Moderate damage to structure and panels. Airbags deployed, large dents
• 0.25 = Minor damage to structure and panels. Dented hood or fender
• 0.00 = No structural damage or replaced panels. Broken side mirror, scratched paint, cracked headlight

Why is my car worth less after an accident?

Cars that have been damaged in an accident, even after a repair, are worth less than cars that have never been in a collision. The reason mostly comes down to perceived safety; a car that’s been repaired might not have been fixed properly or with original manufacturer parts. And you’re typically not covered by a manufacturer warranty or recall in those cases either.

That fact can come back to haunt you if you try to sell your car. Every car accident goes on your car’s vehicle history report. Buyers will be able to see your car’s history of repairs and accidents, and also your car’s diminished value.

Your car’s diminished value after an accident is important to understand if you want to refinance or sell your car, or if you want to file a diminished value claim with an insurance agency because of an accident where the other driver is at fault.

Can I make a car insurance claim for diminished value?

Not in most states, but the laws can get foggy. In most cases, the law states that your insurer must repair or replace your car after an accident. In other words, insurers must compensate you with a car of similar quality as the pre-accident vehicle, either by repairing the car to its original condition or paying out the value of your car if it’s totaled.

However, a few drivers have sued for additional damage because of diminished value. You stand the best chance of getting your claim approved if:

• You have solid proof of the decreased value
• Another driver was at fault in the accident
• You’re hit by an uninsured driver and you have uninsured or underinsured motorist coverage

States that allow diminished value claims

These states have a law or court precedence for claiming diminished value damage. Most other states don’t allow for diminished value claims as long as the insurer fulfills their duty of repairing or replacing the car.

How to file a diminished value claim

If you live in a state with legal precedence, you could go through the hassle of this claim if your car’s value has decreased significantly. Jumpstart the process in a few steps:

1. Contact the at-fault driver’s insurance company, detailing the accident events and the extent of your car’s damage.
2. Specify that you’re filing a claim for diminished value after a car accident.
3. Prove the diminished value, either through market value reports of similar cars or through a professional valuation.
4. Give additional documentation as needed. The required documents will vary based on your car’s condition and the events of the accident.
5. Get an answer from the insurance company, approving or disapproving a settlement for the diminished value.
6. If the company denies your claim but you feel that you deserve a settlement, you can appeal the claim or get legal advice about suing the insurance company. In many cases, the payout may not be worth the legal costs unless the damage was substantial.

Diminished value types and definitions

You’ll hear insurers and courts use a few different definitions of diminished value. Those are:

• Inherent diminished value. Your car’s worth less to a potential buyer because it was in an accident.
• Instant diminished value. How much your car is worth immediately after an accident but before repairs. Your car’s immediate post-accident condition is when your insurer decides the cost of repairs to restore your car to its original condition, not necessarily its original value.
• Repair-related diminished value. Your car is worth less because it was poorly repaired after an accident.

What can I do if my car is worth less after an accident?

• Make a claim for diminished value. If your state allows it, you could recover some of your car’s lost value.
• Choose a payout over repairs. If your car isn’t declared a total loss, which is when repairs would cost more than the car is worth, but it’s within 75% of a total loss claim, you can try to make an appeal for a total loss decision instead. You’ll get paid cash for your car’s pre-crash value instead of getting a car that’s worth less after getting repaired.
• Drive your car into the ground. If you don’t sell your car and instead keep it until it breaks down for the last time, you won’t have to worry about diminished value.
• Avoid a salvage title. You’ll typically have the choice to buy back your car on a salvage title if it’s declared totaled. But your car will be worth even less in this case since it’s not repaired and carries a salvage title. Some people consider keeping their salvaged car for nostalgia or to repair it themselves, but the car won’t be worth much in this case.

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Bottom line

Not all insurance companies will use the same calculations to arrive at the diminished value of your car post-accident, but using the 17c formula will give a good starting point so you’re armed with the knowledge you need. Know how much your car is worth so you’re prepared for selling your car or comparing how much car insurance you need.