Why Should I Know About Diminished Value?
You may hear the term diminished value quite often after you’ve been in a car accident. But what exactly is it and why should you care? Below you’ll find important information on what diminished value means, the different types of diminished value, and why you should care about it if you’ve been in an auto accident.
What Does “Diminished Value” Mean?
The term diminished value involves a car’s resale value. After a car accident, a vehicle is considered to have diminished value. For instance, when comparing a vehicle that’s been in a car accident to the exact car of the same year, make, model, mileage, and color — the car that’s been in the accident will be worth less. However, how your car is repaired can influence its resale value. This is why it’s important to choose your car parts and repairs wisely after a collision.
People will sometimes confuse the terms diminished value and depreciated value. Diminished value specifically refers to the value of a car after an auto accident while depreciated value refers to the overall decrease in value due to the typical wear and tear of a car throughout ownership.
The Three Types of Diminished Value
There are three different types of diminished value:
Immediate diminished value: Once the repairs have been done after a car accident, the immediate diminished value will be the difference in the resale value from before the collision to after the collision.
Inherent diminished value: When you think of inherent diminished value, think of accident history reports. If a car has been in an accident and has been repaired as closely as possible to its original condition, there will still be a record of the accident, which will make its overall market value diminished in the eyes of potential buyers.
Repair-related diminished value: If a car that’s been in an accident has repairs completed with used, generic, or aftermarket car parts, it’s considered to have repair-related diminished value. This can severely affect the resale value of a car, especially if it’s a luxury vehicle.
Why Should I Care About Diminished Value?
It’s important to understand what diminished value is if you’re in a car accident and you’re filing a claim to be compensated for your car’s diminished value. How your insurance company handles your claim and how you choose to repair the car can determine your resale value. Remember that the majority of car insurance companies will refer you to “preferred” repair shops that may use used, generic, or aftermarket car parts in order to save money. When the time comes to sell your car, you might be dealing with a repair-related diminished value that can negatively affect the sale price of your car.
If you’ve recently been in a car accident and you’re concerned about the recommended repair shops provided by your insurance company, remember that you do have options. At Collision Management, our car experts only connect you with the most experienced, reputable, and trustworthy car repair shops in South Florida. Remember that it’s your car, so it should be your choice!