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.