Thursday, November 28, 2013

Diminished Value: Things To Be Thankful For

The In's and Out's of Diminished Value

     Thanksgiving is once again upon us.  A holiday replete with family gatherings, enough food to feed a small army, and of course the inevitable food coma.  While some may be thankful for their grandmother's yams to come, there are others in the automotive world who may be looking for more to be thankful about.  Whether you be a fan or a foe of the canned cranberry sauce that is likely to rear its head, I present you with your 2013 Things to Be Thankful For, Diminished Value. If you have ever owned an automobile, or ever plan to, this is a concept that I urge you to familiarize yourself with.  This post is meant to serve as an informatory guide as to how best to navigate the waters of the sea that is diminished value.

What Is Dimished Value, And Why Is It Important?

     No matter your geographic location,  it is almost guaranteed that to legally drive an automobile, you must meet certain insurance minimum requirements.  There are undoubtedly those who drive without it, but these drivers would fall within the minority of the driving population.  I start with mentioning auto insurance coverage, as diminished value is a legal term and financial tool that often involves insurance carriers.  Diminished value in layman's terms is described as the approximate monetary value of a given vehicle prior to being damaged, and the adjusted value of a vehicle that results from a given collision or damage related incident. 
     Your car was worth $25,000 prior to being hit by that oblivious driver performing an illegal U-turn.  The cops are called, liability is determined, and your car is towed to a repair facility.  Even if the auto body repairs were performed flawlessly, your car now is the proud owner of a Carfax report, and in good faith you must tell future potential buyers about the vehicle damage.  So this all seems fairly straightforward, so what's the big deal?  Consider this: certified cars salesman initially will deduct up to 40% of trade in value as the result of one Carfax accident report.  Forty percent is a significant loss no matter what the value of your vehicle, and as the value of the vehicle grows, as does the amount of money you lose as well.  If you cannot understand the importance up until this point, private buyers are terrified of Carfax accident reports, and shy away from vehicles with a past.

How Do I Go About Submitting A Diminished Value Claim?

     Diminished value claims are not met with a high amount of praise when viewed from an auto insurance carrier perspective.  Then again, what auto insurance carrier likes to pay one cent more than they have already paid on behalf of their insured?  These auto insurance carriers will try to say that there is no law on the books that requires them to pay for these claims.  Again, they will do anything to talk their way out of paying more money.  I can tell you first hand, I have aided dozens of customers through this process, and every single one of them was successful in their pursuit of diminished value.  As you may know already, I work at a high-end auto body repair facility, meaning that the average value of our customers' vehicles may be higher than your average repair facility.  However, out of the many diminished value claims that I have personally been involved with, the range of claims have ranged from around $3,000-$22,000, depending on the value of the vehicle.  The higher the value of the vehicle prior to the accident, the higher the amount of diminished value as a result of the accident.  Now that you have an understanding of the basics, let me give you a few pointers and important information as to your diminished value claim.

1. Diminished Value Claims Cannot Be Filed With Your Own Insurance Carrier- In other words, dimished value claims can only be filed through the auto insurance carrier of the liable party that damaged your vehicle. This is one of strongest arguments for always going through the insurance carrier of the responsible party, as your premiums cannot be affected, and you can pursue diminished value.  If you go through your insurance company when you are not liable for the damages, diminished value can still be pursued through subrogation, though it is far more time consuming and complicated.

2. Police Reports Equal A Carfax Accident Report- If the police issued a citation or wrote up an accident report, it is more than likely that your car now has a tainted history.  These are the reports that car dealers use to greatly reduce trade in value, and private buyers hate to see.  Even if the damage was minor, these reports do not really differentiate between minor and extensive damage, meaning small accidents come with the same financial consequences as large ones.  Carfax or other history reports increase the amount of the settlement as a result.  A Carfax is not mandatory for diminished value, but if your car was repaired properly, with no lasting consequence, sometimes it may not be worth your time.

3. Unless You Want To Increase The Chance Of A Total Loss, Report The Diminished Claim After Repairs Have Been Completed- I have seen many customers pursue diminished value from the very onset of the vehicle damage, and I have seen these same customers lose their cars to total loss more often than not.  Insurance companies will almost never total a car after it has been repaired, as the repairs have been completed, and the repair facility has been paid.  Then the diminished value claim is seen as a separate part of the claim, whereas if initially pursued it is added to the total cost of repairs.  So unless you want your car to be totaled, have some patience and wait for the repairs.

4. Who Can Help Me With My Diminished Value Claim?- A reputable auto body repair facility should be able to direct you to a diminished value professional. These diminished value professionals will sometimes work with a base fee, that increases as the diminished value increases (<2000=$150, >5000=$300, etc.).  Others work on a percentage basis, feel free to choose whichever you are more comfortable with, as percentage basis will be a larger fee, but serves as larger motivation for the dimished value professional to complete the claim.  You can also help yourself through the process by taking before and after photos, asking a dealer what they would pay for your car wrecked, and providing a carfax report as proof of a dimished value to come.  

Wednesday, November 27, 2013

One Car, Two Car, New Car, Used Car

     In the world of car buying, many people seem to have some strange ideas and strategies for the best way to buy an automobile.  There are various species of car buyers and sellers in this world, each of which comes with a particular set of identifiers.  While buying or selling your car may seem like a fairly straightforward concept, I can promise you that there are a wide variety of ways in which you can go about it.  The various scenarios are often influenced by the amount of effort required, the general understanding of the car buying and selling process, and the amount of cash a particular person has in the bank or under their mattress.  Regardless of what type of buyer you may be, I can promise you that there are good and bad ways of navigating through the process.  Unless you enjoy putting your hard earned money in the garbage disposal for kicks, I suggest you continue reading.

Vehicle warranty finances new car buyer
1.  Time Is Money, and I Spend It Like Its Going Outta Style
     For those of you who may be unfamiliar with this young fellow to the left, his name is Kanye West, and I have decided not to comment on his outfit.  This particular photo of a particularly successful human can be used as an extreme example of the first type of car buying scenario.
     If you happen to be so successful that you need golf gloves to properly hold your many Grammys, or multiple solid gold watches to properly tell time, then clearly money is of no issue. In fact, if you are anywhere near this level, I'm not entirely sure that this post is of any use to you.  To put it plainly, buying a brand new car off the lot is akin to paying a high-priced travel agent to book you a vacation.  While you may not have to exert any effort beyond paying the bill, you yourself could have booked the same vacation (if not a better vacation) for less than half the price. The car buying experience that can be found at a new car dealership is very similar to the travel agent scenario.  You are paying more for the experience than you are for the vehicle that you drive off the lot.  In fact, the instant after your beautiful new shiny car leaves the lot, you will lose anywhere from 10-30% of the value depending on the make and model.  All warranties and ass-kissing aside, you are throwing money away, just to say you bought a "new car." Again, if you are short on time and energy, and long on resources, by all means, this scenario may suit you best.  However, if your biggest concern is finding the best possible vehicle within your budget, I highly advise you against scenario #1.

2. I Have The Money, I Have The Time, I Want The Best My Money Can Buy

buying used car tips automobile
     For your information, this is the camp where I choose to reside.  I am by no means wealthy, and I have no crystal ball.  That being said, I do have a lot of experience in the automotive industry, with an emphasis on high-end collision repair.  Though I may have more knowledge and experience than most, I by no means am the foremost expert in the field, nor do people pay me for my wisdom.  Even if you have little to no experience or knowledge as it relates to automobiles, there are a wide variety of resources available to you.  Wherever your geographic location may be, there are reputable mechanics and collision repair specialists who would be more than happy to help you, often free of charge.  Fostering a relationship with knowledgeable people in the industry can be a valuable asset in the future.  Whether you consult them for future vehicle purchasing, or maybe you have a light on in the dash, they often can save you time, energy, and money.  It never hurts to grease them up with a tip for their time and effort, which is what I do in similar situations.
     Perhaps you are unfamiliar with any local mechanics or body shops in your area, which is not uncommon. You can always call a local dealership and ask who they would suggest for such services, or you can consult any one of a number of online forums for information, reviews, and further insight.  If all of the above methods fail to provide you with the necessary information, you can always go the route of a vehicle history report.  Two examples of such vehicle history reports would be Carfax, and Experian Auto Check. Although, if you have read any of my earlier posts you will find that these services can be wholly inadequate from a vehicle damage history perspective.  These reports can be very informative as they relate to a number of total previous owners, maintenance records performed at the dealer, and the status of the title.  However, all of this information can be found through your local Division of Motor Vehicles, or by calling into local dealerships with a Vehicle Identification Number.  If a particular person is selling their car, it is likely that they will have maintenance records on hand, and should be viewed as somewhat suspect if they do not.
     If scenario #2 seems to fit your particular needs and desires, then you think in a similar fashion as myself.  The main reasoning behind this scenario is that you want to find the best possible car given your budget, while mitigating future risk by doing the right amount of due diligence. If you are willing to be patient while searching for your desired car, while collecting all the information you need to make an educated decision, you can find a great if not pristine car at a sizable discount.  Here are a few things to keep in mind for scenario #2.

  1.  Be Patient- You don't need to pull the trigger on the first car you find, find comparable vehicles so that you know you are making the best decision.
  2.  Use The Resources You Have Available- Unless you are Kanye West, or have little to no concern about the value of your investment, take the time to research prospective vehicles.  The little extra time and effort will make all the difference in making the best decision.
  3. Listen To Those Who Know- If you have taken the time to consult knowledgeable parties for a professional opinion, do not shoot yourself in the foot. Even if you are completely in love with a particular car, if a professional advises against it due to its shortcomings, take their advice. There are always more cars, refer to tip number 1.
  4. If It Seems Too Good to Be True, It Probably Is- Would you trade $5 dollar bill for a $1 bill? If you answered yes, then I am sorry, but the intelligence train missed your station.  It's very similar with automobiles, if a particular seller is selling a car for far less than market comparisons, there is likely a big reason for the big discount.  There are exceptions to this rule, but as long as you have followed tip number 2, you should feel comfortable in your decision.
  5. A Previously Wrecked Car Is Not A Deal Killer- I know that most people have ten bad experiences with cars for every 1 good experience with them, however, this should not be the case.  Yes there are lemons out there, and yes people can be dishonest, but if you have followed the tips listed above then you should be fine. Wrecked cars are only a bad idea if they have not been repaired properly, and if the seller is unwilling to disclose many details.  Consult your local professional with the details you have been given, they can help you decide whether or not to move forward.

3. So What If It Has A Salvage Title? The Seller Said It Was Minor Damage, And It's A Screamin' Deal!!!

salvage title vehicle damage history dangers    You likely stumbled across this blog because you Googled "how to buy a new car", or "how to buy a great used car for less?" If you did in fact use one of these search queries, or any other similar search, then you should not ever even consider buying a salvage vehicle.  Let's say you followed the five tips enumerated above religiously, then you should probably be more or less okay.  Buuuut, I would strongly advise against it. I cannot tell you how many times I have heard people say, "Yeah it's a salvage title, but it was hit from
behind, so it's good mechanically." Or how about this one, "It wasn't even wrecked, it only has a salvage title because it was a theft recovery!"  Wrong, wrong, wrong, stupid, shameful, and wrong again. Salvage title cars have either caught fire, been inundated with water, stolen for an incredibly damaging joy ride, or the insurance company deemed that the cost of repairing the vehicle would be equal to or less than 75% of the overall value of the vehicle if it had not been wrecked.  If someone pitches that a car has a salvage title due to rear end damage, what does this tell you?  That the particular car was hit tremendously hard from behind to achieve such a high cost of repair, as there are very few high dollar mechanical parts in the rear.  The same goes with a theft recovery car, someone drove it as hard as they could, until they got caught, or until the engine ceased.
     While a similar, but more stringent, rule applies to buying salvage vehicles, unless you are a knowledgeable car buyer, do yourself a favor and move on to the next car.  As long as a salvage vehicle has been repaired properly, then other than the diminution in value, it should be a perfectly good car. HOWEVER, salvage vehicles are notoriously purchased by pride less bottom feeders, who have no pride in their work, cut numerous corners throughout the repair process, and render a car unsafe to drive and impossible to sell. Do yourself a favor and don't venture into the netherworld of compromised salvage vehicles, because you most likely get bitten.  Best of luck, and happy hunting!