What is Diminished Value and How to Calculate it after an Accident?

March 16, 2023

What is Diminished Value and How to Calculate it after an Accident?

Diminished value is a term used in the insurance industry to describe the difference in the value of a vehicle before and after an accident. Understanding the diminished value is important to ensure you are properly compensated for any losses you may have suffered. 

Here’s everything you need to know about what diminished value is, how its calculated, and how to maximize your diminished value claim.

What is Diminished Value?

Diminished value is the difference in the market value of a vehicle before and after it has been in an accident, even if the car has been fully repaired. To be more elaborate, “diminished value” is the loss in the market value of a vehicle that has been involved in an accident and repaired, even if the repairs were performed correctly and the vehicle looks like it did before the accident. It refers to the difference in value between a vehicle before an accident and its value after repairs have been made.

There are two types of diminished value: 

  • Inherent diminished value is the loss in value due to the fact that the car has been in an accident, regardless of whether it has been repaired or not. 
  • Repair-related diminished value is the loss in value that occurs as a result of poor or incomplete repairs. Factors that affect diminished value include the severity of the accident, the age of the vehicle, and the market demand for the make and model of the vehicle.

Understanding diminished value is important because it can help you negotiate with insurance companies after an accident. If you are not at fault in an accident, you may be able to claim the diminished value of your vehicle as part of your insurance settlement. This can help you recover some of the financial losses you have incurred due to the accident.

How to Calculate Diminished Value?

To calculate the diminished value, you will need to use a formula that takes into account several factors, including the pre-accident value of the vehicle, the severity of the damage, and the mileage on the vehicle. The formula is as follows:

Diminished Value = (Pre-accident value x Damage Multiplier x Mileage Multiplier)


Let’s say you own a 2018 Toyota Camry that was worth $20,000 before the accident. After the accident, your vehicle required $7,000 in repairs, and the damage was rated as moderate. Your car has 50,000 miles on it. The damage multiplier for moderate damage is 0.50, and the mileage multiplier for 50,000 miles is 0.30.

Diminished Value = ($20,000 x 0.50 x 0.30) = $3,000

In this example, the diminished value of your vehicle would be $3,000.

When to Calculate Diminished Value?

It is important to calculate the diminished value as soon as possible after an accident, as there is a statute of limitations on making a claim. The statute of limitations varies by state, but in general, it is two to three years. 

Calculating the diminished value soon after the accident will also ensure that you have the necessary evidence to support your claim, such as photographs of the damage and repair records.

How to Maximize Your Diminished Value Claim?

To maximize your diminished value claim, it is important to provide as much evidence as possible to support your claim. This includes photographs of the damage, repair estimates, and any other relevant documentation. It may also be beneficial to hire a professional appraiser to provide an expert opinion on the diminished value of your vehicle. It is also important to negotiate with the insurance company to ensure that you receive a fair settlement.

Diminished value is important because it can impact the resale value of the vehicle. A car that has been in an accident and has a diminished value will be worth less on the market than a similar car that has not been in an accident. Even if the repairs have been made perfectly and the car looks like it did before the accident, potential buyers may be hesitant to purchase a vehicle that has a history of accidents.

If you are planning to sell your car, trade it in, or use it as collateral for a loan, you will likely receive less money for it than if it had never been in an accident. This loss of value can be significant and can have long-term financial consequences for the vehicle owner.

Schenk Podolsky, Mesa Arizona

Give us a call at Schenk Podolsky Attorneys at Law to know more about the diminished value after an accident.