Understanding Automotive Diminished Value Calculations, Part Three

25th June 2019

As we mentioned in Part Two of this article, automobile insurance companies have a specific method they use to calculate the diminished value of a vehicle after an accident. They use a formula they refer to as the “17c Method.” However, as you might surmise, the values that they arrive at tend to be conservative. Alternately, one can calculate a vehicle’s diminished value with “real world” marketplace values. Here’s how Victorville Motors (Victorville, CA) says it is commonly done: 

Marketplace Diminished Value

  1. Search for comparable cars for sale. Find cars that are similar to yours for sale on the web. Spend some time doing this so you can find some 4-6 examples. Be sure that you find cars that are very close in terms options and mileage to yours. The cars you find should be the exact same year as yours.
  2. Now look for cars that have a roughly similar accident history. Here’s a pro searching tip: look at the price differences between “pre-owned” and “certified pre-owned” cars at major dealerships. Usually, cars with structural damage from accidents won’t be sold as “certified pre-owned.” Looking at the price of cars similar to yours sold just as “pre-owned” can give you an idea of what yours is worth. 
  3. Bring it all together. Start with the average of what you found as the Edmunds value of your car and a few retail prices you find on the web. Then, consider the prices of similar cars with accident histories. The difference between these two values is your estimated diminished value.

For example, consider a 2016 Golf R in excellent condition with 57,000 miles. Edmunds estimates this car would retail for $28,165 and two similar cars on the web retail for $29,500 and $27,500. The average of all three of those retails is $28,388. Then subtract the value of a similar car with an accident history, $25,500 and the diminished value clocks in at $2888.

Note: Some law firms specializing in diminished value litigation estimate that the value lost when a vehicle is in an accident is around 33 percent. This means that your car valued at $15,000 would be worth about $10,000 in reality when you tried to sell it. You may want to use this type of estimation as a starting place for determining your diminished value.
