What is Diminished Value?

Diminished Value Equals Loss in Resale Value Due to Accident History

Does everyone know what Diminished Value Means?

Diminished value is certainly a well kept secret in the insurance industry, which the insurance companies would prefer to continue to keep under the radar of consumers. If you search for an explanation of diminished value, you may come across more than one definition:

Immediate Diminished Value is the loss in value of your vehicle immediately after it has been damaged, but prior to any repairs being undertaken. Subtracting the value of your vehicle immediately after an accident from the vehicle’s value just prior to the accident will provide you with its immediate diminished value.

The most widely recognized form of diminished value is Inherent Diminished Value. Simply put, it is the loss in resale value of your vehicle due to its accident history even though it has been expertly repaired. Insurance companies want consumers to believe that diminished value does not exist, as repairing a wrecked vehicle will bring it back to its pre-accident condition. DO NOT BE FOOLED. The accident history stigma will remain with the vehicle and negatively impact its resale value. Inherent diminished value assumes that the best possible repairs have been completed, and is the basis of most claims submitted to the at fault party’s insurance company.

If your vehicle has undergone less than optimal repairs, an additional reduction to its resale value may result, which is considered to be Repair Related Diminished Value. Also, an insurance company’s mandated use of non original manufacturer parts in the repair process can also impact your vehicle’s diminution in value, and this is referred to as Insurance Related Diminished Value. Both Repair and Insurance Related Diminished Value may add to your inherent diminished value claim.

An MMI nationwide consumer survey clearly shows that close to two thirds of surveyed consumers were aware of the terms “diminished value” and “accelerated depreciation” as it related to a damaged and repaired vehicle. But, the majority of consumers (>75%) were unaware of their ability, if not at fault for the accident, to have their car expertly repaired and also recover monetary damages due to the loss in value of their vehicle. The repair costs and loss in value are collected from the at fault party’s insurance company.