Understanding Diminished Value and Your Car Insurance |
Posted: April 17, 2018 |
You were the victim of a rear-end collision that left you with several thousand dollars of damage to your vehicle. You filed a claim with your Colorado Springs auto insurance agency, and it’s been repaired as good as new. In fact, looking at the vehicle, you can’t even tell there was any damage. It might even look better than it did before the accident.
Looks can be deceiving. Even if your vehicle looks good, it may now have a lower value because of the accident. This is called diminished value and it could have an impact on your vehicle’s resale value or trade-in when you’re ready to buy a new car. What is Diminished Value and Why Does It Happen?
If you’ve been to a dealership and purchased a used car, your sales person probably ran a CarFax report. This report will tell you all about the vehicle and if it were involved in any accidents. This information is important to buyers because they can use it to negotiate a lower price.
Diminished value is the reduced value of a vehicle after it’s been in an accident or had damage. Even if it’s been repaired, many buyers feel it isn’t worth what it was before the damage. For cars older than one or two years, most body shops will use aftermarket parts for repairs, which can also reduce the value. Even though the parts are made to work as well as the original, the perception is that the vehicle now has less value due to lower-quality parts.
What You Can Do
If you aren’t at fault for the accident, you may be able to file a diminished value claim. Some insurance companies provide for that cost in their policies, but many don’t. You can also request original parts rather than aftermarket parts, and in some cases, the insurance company will have to pay for them. While this may not give you full value for your vehicle, it can help.
It’s also a good idea to pay extra on your auto loan if you’re financing your vehicle so that you don’t owe more than what the vehicle is worth. If you can keep your value above what is owed, you can trade it in and still walk away with more money than what is needed to pay off the loan. While this won’t fix the issue of diminished value, it can lessen the impact when you’re ready to trade it in or sell it for another vehicle.
Even though you can’t always prevent your car from losing value when it’s involved in an accident, you can be prepared for the impact. It’s also important to realize that the greatest loss in value will come from claims with more damage. A vehicle with $5000 in damages will suffer from greater loss in value than one with only $1000 in repair costs.
Purchasing gap insurance when you buy a new vehicle or having it added to your insurance policy could help eliminate the problem of reduced value in a total loss accident. Understand what diminished value means for you as the owner and talk to your Colorado Springs auto insurance agent to ask questions about your policy.
John Smith works for John Smith Insurance Agency which provides vehicle insurance Colorado Springs. Affordable rates and superior service for all home, auto and business/commercial insurance needs.
|
|||||||||||||||||||||||||||||||||||||||||||
|