How Much Does An Accident Devalue A Car?

You’ve probably heard that cars drop in value the second you drive them off the lot. Which is totally true. When you go from 0 miles to 1 mile on the odometer, you new car can lose around 10% of its value.

Crazy, we know!!

But what if your car is involved in an accident? How does that affect its value?

The Value Of Your Car After The Accident

All vehicles lose value after a car accident. How much depends on a few factors. These are:

  • The type of care you own
  • The value of that car before the accident
  • Any accidents that the car had in the past
  • The condition of the vehicle after the crash

If you’ve been in an accident, usually a claims adjuster will come out to look at the car and assess the damage. Basically they’ll estimate how much the car is worth, cut a check and they’re done.

Even if you get your car repaired after the accident and the repair shop does an awesome job, your car will still be worth less when you try to sell it. And it will also affect its trade-in value negatively as well. In fact, dealers will likely ding you even more for an accident than a private seller.

Diminished Value and the 17c Formula

If you car’s been in an accident, an important term to know about is Diminished Value.

Diminished value is basically the difference between a car’s value before and accident vs. after an accident. To calculate diminished value, insurance companies use the boringly titled 17c Formula.

This formula has been used since 2001. Around that time, there was a lawsuit in Georgia where State Farm had to settle around 25,000 claims. The 17c Formula was created for this case so there was an easy, standardized way to calculate the diminished value for all these claims.

Because it worked so well for that situation, most insurance companies now use it  to figure out the value of cars that have been in an accident.

That said, it is a controversial figure. Many people complain that insurance companies use it to lowball the amount of money they have to pay out to people involved in car accidents (you didn’t expect insurance companies to over pay, did you?!).

What If You Don’t Like the Insurance Company’s Offer?

All that said, you don’t have to be bound by this formula. If an insurance company comes to you with an offer that you think is too low, you have every right to refuse it.

You can then either hire a car accident attorney (if you haven’t already) to fight for you and get a bigger settlement. Or, you can also hire a private appraiser to check out your wrecked car. Your appraiser can send their appraisal to the insurance company and then you and the insurance company negotiate a higher offer.

If you are not using a car accident attorney to help you with things, it’s a good idea to read up on your insurance policy and rights proper. Yes, it will likely be mind-numbingly boring, but it’s important to know the rules of the game before you accept an insurance company’s offer.