What Is Diminished Value?

Diminished value refers to the reduction in a vehicle’s market value after it has been damaged and repaired. Buyers and dealerships rely heavily on vehicle history reports, and the mere presence of an accident—even a minor one—can significantly lower a car’s resale or trade-in value.

There are three commonly recognized types of diminished value:

• Immediate diminished value: The loss in value right after the accident, before repairs.

• Repair-related diminished value: Value lost due to incomplete or substandard repairs.

• Inherent diminished value: The most common type, reflecting the loss in value simply because the car now has an accident history.

Most diminished value claims focus on inherent diminished value.

What Is a Diminished Value Appraisal?

A diminished value appraisal is a professional report prepared by a qualified vehicle appraiser that calculates how much value your car lost as a result of the accident. Unlike generic formulas used by insurance companies, a proper appraisal analyzes real-world market data, including comparable vehicle sales, pre- and post-accident values, mileage, condition, and regional market trends.

This appraisal serves as documented evidence when filing a diminished value claim with the at-fault party’s insurance company.

Why Insurance Company Offers Often Fall Short

Insurance companies may offer a diminished value settlement, but these offers are often based on internal formulas designed to minimize payouts. One common example is the “17c formula,” which has been widely criticized for undervaluing actual losses and lacking market accuracy.

Without an independent appraisal, vehicle owners may unknowingly accept settlements that fall far below their car’s true diminished value.

Benefits of a Professional Diminished Value Appraisal

A professional appraisal provides:

• Credible, third-party documentation

• Market-supported valuation methods

• Strong negotiation leverage

• Support for disputes or legal action if necessary

In many cases, the cost of an appraisal is small compared to the additional compensation it helps recover.

Who Should Get a Diminished Value Appraisal?

If your vehicle was damaged due to another driver’s fault and has a documented accident history, you may be entitled to compensation for diminished value. This applies especially to newer vehicles, luxury cars, low-mileage vehicles, and cars with significant repairs.