When your car gets damaged in an accident it can negatively affect its value. Even if it has been repaired, your accident history can affect how much your car is worth when you decide to sell or refinance it in the future. Diminished value is how much value your car loses after it has been damaged in an accident.
Calculating Diminished Value
A few different factors go into calculating your car’s diminished value.
- Of course before you find out the diminished value of your car, you have to find out how much your car is worth depending on the year, make, model and mileage.
- Once you know the value of your car, say it’s worth $15,000, you can calculate the base loss of value. Insurance companies usually divide the value of your car by 10. If you use this calculation, then the most you can lose due to diminished value is $1,500.
- After your base value is calculated, a value will be set based specifically on your vehicle. Your car will be given a number between 0.0 and 1.0 based on how much damage was done to your car from an accident. That number will be multiplied by the base value. If your car had moderate damage, 0.5, the diminished value would be adjusted to $750.
- Your car’s diminished value will then be determined based on its mileage. If your car has over 100,000 miles on it, the diminished value from the above answer would be multiplied by 0, remaining at $750. If your car had only 20,000 – 39,000 miles on it, you would multiply the above value by 0.8, adjusting your diminished value to $600.
The number you have after the above steps is your car’s final diminished value. It may be calculated by your insurance company, the buyer or car dealership. Although they may use different numbers to come up with their totals, these are the factors that go into calculating your car’s diminished value.