What Is a Diminished Value Claim?
A diminished value claim helps you recover the lost value of your car after a crash or other incident you didn’t cause.
This is important because the value of your car goes down after it’s damaged in an accident — even if the vehicle is fully repaired.
How does a diminished value claim work?
A diminished value claim helps you reclaim the cost difference between what your car was worth before and after an accident.
Your car starts losing dollar value as soon as you drive it off the lot. After an accident, your car’s value goes down, or depreciates, even more. Even if your car is repaired to brand-new condition after the crash, it’ll still be worth less if you choose to sell it.
For example, say your car was worth $23,000 before an accident but just $15,000 after repairs are done. A diminished value claim could help you get back some of the $8,000 that was lost due to the crash.
Types of diminished value claims
There are three types of diminished value claims you can file for your damaged car: inherent diminished, immediate diminished and repair-related diminished.
Inherent diminished value claim
You file an inherent diminished value claim to reclaim loss of value due to the car now having an accident on its history report. This is the most common form of diminished value claim.
Any repairs done to a car after an accident reduce its value, even if the car is restored to perfect condition. This will be noted in the vehicle’s history report (VHR). It will lower the car’s market value, or how much you can sell it for.
With an inherent diminished value claim, you can get back the difference between the car’s value now and its value if it had not been in an accident.
Immediate diminished value claim
An immediate diminished value claim is similar to an inherent diminished value claim, except it is made before any accident damage is fixed. If you don’t want to wait for repairs after an accident and instead want to trade in the car for a new one, for instance, you could file an immediate diminished value claim.
The cash amount you receive is based on the difference between the market value of your vehicle before the accident and its actual value before repairs are started.
This type of diminished value claim is usually only used in court proceedings. It is rare to see it used outside of court.
Repair-related diminished value claim
You might file this type of diminished value claim if repairs to your car after an accident are subpar. This is because the value of your car can go down even more if repairs aren’t done well or are made using low-quality parts.
For example, if engine repair work done to your damaged car is substandard and causes the car to not run properly, it can lower the value of the car if you want to sell it. A repair-related diminished value claim would compensate you for the loss. This type of claim assumes that work to restore the car to pre-accident condition is impossible.
When to file a diminished value claim
You can usually file a diminished value claim when:
- You did not cause the accident. If your vehicle is damaged in an accident that another driver caused, you could file a diminished value claim with their auto insurance company.
- You’re in a hit-and-run accident. If you’re the victim of a hit-and-run and have uninsured motorist coverage, you can file a diminished value claim with your car insurance company to get reimbursed.
- The at-fault driver is uninsured or underinsured. If you are in an accident caused by an uninsured or underinsured driver, you can file a diminished value claim against your uninsured/underinsured motorist coverage through your own insurance company.
How to calculate diminished value
Car insurance companies use what’s called the “17c formula” to calculate the diminished value of a vehicle. The 17c formula is:
Diminished value = car’s value x 10% cap x damage multiplier x mileage multiplier
To use the 17c formula yourself:
1. Find the current value of your car. You can use sites like Kelley Blue Book to look up the current value of your make and model of car. Enter the VIN number of your car if you don’t know the make or model.
2. Calculate the 10% cap. This is the base loss of value of your car. Multiply the current value of your car by 10% to get the base loss. For example, if your car is valued at $25,000, the base loss would be $2,500. The highest percentage amount you can get from a diminished value claim is 10%.
3. Calculate damage multiplier. Now add the damage multiplier, which will range from 0 to 1.0. This table shows which multiplier to use.
| Multiplier | Damage level |
|---|---|
| 1.0 | Severe damage |
| 0.75 | Major damage to car |
| 0.50 | Moderate damage to car |
| 0.25 | Minor damage to car |
| 0 | No structural damage car |
Say your $25,000 car suffered moderate damage. You would take the $2,500 base loss value and multiply it by 0.50, with the final result being $1,250.
4. Calculate mileage multiplier. Your car’s current mileage at the time of the accident is also a factor. The mileage multiplier you’ll use will range from 0 to 1.0. Use this table to find the correct multiplier based on your vehicle’s mileage.
| Multiplier | Mileage range |
|---|---|
| 1.0 | 0-19,999 miles |
| 0.80 | 20,000-39,999 miles |
| 0.60 | 40,000-59,999 miles |
| 0.40 | 60,000-79,999 miles |
| 0.20 | 80,000-99,999 miles |
| 0 | 100,000 miles or more |
If your car has 50,000 miles on it, you will use a mileage multiplier of 0.60. Take the $1,250 amount from step three and multiply it by 0.60. This gives you a total of $750. This is the payout amount you could expect from a diminished value claim.
It’s good for you to know this formula, as it lets you judge if your insurer is valuing the diminished value of your damaged car correctly. A criticism of using the 17c formula is that the values used can be hit or miss, leading to your car being undervalued.
How to file a diminished value claim
File your diminished value claim with the at-fault driver’s car insurance company as soon as possible. Filing quickly helps support your need for the claim.
States have different statutes on limitations for how long you have to file a diminished value claim.
All state statute of limitations to file a diminished value claim are at least two years. You should still want to file as quickly as possible to help your case.