How Much Does a Car Depreciate After an Accident?
Vehicle Damage Affects ValueWhen you’re in a car accident, you typically incur damages. Those can include losses associated with physical damage to your vehicle. Even if your insurance company or the insurance company for another driver covers the cost of repairs to your car or truck, your vehicle may not be worth the same amount after the accident as it was before. Learn more about diminished value below, including what it is, why it matters, and how you can protect your interests following a car accident.
What Is Diminished Value?Diminished value refers to the difference between what a vehicle was worth before an accident and what it is worth after the accident—even once repairs have been made. It’s important to realize that all vehicles depreciate in value over time. How fast a car loses value depends on factors such as the make and model, but vehicles can lose up to around 20 percent of their value in the first year. For example, if you buy a new vehicle worth $30,000, at the end of your first year of ownership it may only be worth $24,000. By the fifth year of ownership, your vehicle may have lost around 40 percent of its original value. In the case of a vehicle with a starting value of $30,000, the new value might be as low as $18,000. That depreciation is for vehicles that have not been in an accident. If you are in an accident, your vehicle may be worth even less.
Why Does Diminished Value Matter?Diminished value matters for several reasons. First, if you ever want to sell a vehicle after it’s been in an accident, you might not be able to get as much for it as you would if it had not been in an accident. Second, the value of the vehicle after an accident may be less than you owe on it. If you’re in another accident and the vehicle is totaled, you might not get enough in insurance coverage to pay off your auto loan. That can mean you’re on the hook for a larger dollar amount.
How Do You Know What Your Car Is Worth After an Accident?The best way to know how much your car is worth after an accident is to have it professionally appraised. You can also use tools such as Kelley Blue Book to estimate the value of your car, given its current condition. The age of your car and its trim level are some other factors that may impact what your vehicle is worth. The type of accident you are in can also impact your vehicle’s diminished value. A rear-end collision that damages your bumper and the back of your vehicle might reduce the value less than a front-end collision that causes damage to your engine, for example. In most cases, car values go down after a collision even if high-quality repairs have been made to return the vehicle to its pre-collision condition. This is partly because individuals would not want to pay the same amount for a car that has been in a major accident as they would for a vehicle that has no history of accidents. There are a few exceptions. A fairly old car that has been extensively repaired might have a higher value after those repairs. That’s because repairs mean new parts, which may enhance the reliability of an older car.
Will Insurance Cover the Difference?If your policy or the insurance policy for another driver covers your accident, the insurance company typically pays for the repairs to your vehicle. If you are at fault in the accident, you may need to pay any deductible amount first. In general, insurance companies don’t issue payments to cover the diminished value of your vehicle. In some cases, you may be able to file a claim or seek compensation for this diminished value as a loss you suffered alongside other losses due to an accident. If someone else was liable for the accident, you may have a claim against them.
Protecting Your Interests After a Car AccidentThe diminished value of your vehicle is only one financial consideration you may face after a serious car accident. Some other types of losses that can be common after a car accident include:
- Vehicle repair costs: If your car is damaged in an accident, the cost of repairing it can be significant, particularly if the damage is extensive.
- Medical expenses: If you or someone else is injured in the accident, you might incur medical expenses for hospitalization, surgeries, doctor visits, and physical therapy.
- Lost wages: If you’re unable to work due to injuries sustained in an accident, you may lose out on normal compensation from your employer, reducing your income.
- Evaluate the extent of your damages, including medical bills, lost wages, property damage, and any other expenses related to the accident. This will help ensure that you receive fair compensation for your losses.
- Negotiate with insurance companies on your behalf to make sure you receive a fair settlement that covers all of your damages.
- File a lawsuit to recover the compensation you deserve. This may be necessary if the insurance company denies your claim or if the other driver was uninsured or underinsured.