How Do You Calculate The Diminished Value Of A Vehicle?

When an accident occurs and your vehicle is totaled, the insurance company pays you for the vehicle’s value immediately before the crash. If it’s reasonable to make repairs, the insurance company should pay for them.

However, no repair can restore a vehicle to its pre-accident state. Thus, an insurer should pay an amount above the repair cost. That additional amount compensates you for the fact that your vehicle has an accident history and isn’t worth what it was worth immediately before the accident. Our Colorado car accident lawyers explain what you need to know about how to calculate the diminished value of a vehicle in Colorado.

What Is Diminished Car Value In Colorado?

Diminished car value is the loss in value that your car has because of an accident. It’s not the cost of repairs. Diminished car value accounts for the fact that you can never remove the circumstance that your vehicle has an accident history. The loss in value occurs because a car that has been in an accident doesn’t have the same market value as an accident-free car.

Diminished Car Value

It’s easy to confuse the diminished car value with the cost of repairs. They’re different things. The cost of repairs is what it takes to get your car into working condition again. It actually minimizes the diminished value of your car by restoring it to the best condition possible.

Related reading: What To Do if Your Car Is Totaled After an Accident.

By contrast, diminished value is the reduction in the market value of your vehicle that’s inescapable after a collision. The repair shop might use aftermarket parts with a different quality and build than OEM parts. As a result, the vehicle might develop a rattle, or the steering wheel might not feel right. Even though the car functions properly, it isn’t the same vehicle as before the collision.

Even if you avoid any nagging or persistent problems with your vehicle after a crash, it will have a diminished value simply because of the car’s accident history.

You can conceptualize this diminished value in this way: Suppose you want to buy a used vehicle. You inspect and test-drive it and decide to offer $15,000. However, after the seller discloses that it was in an accident, you reduce your offer to $13,000.

This $2,000 reduction in your offer didn’t arise because of any specific issue. Rather, you cut your offer because you perceive the vehicle to be worth less since it was previously in a crash. This represents the vehicle’s diminished value.

Although it’s tied into replacement costs for even minor damage caused by a rear-end collision, diminished value is separate from the costs of repairs after an accident.

How Do You Calculate The Diminished Value Of A Vehicle?

To calculate the diminished value of a vehicle, you take the following steps:

• Determine the value of the car immediately before the accident
• Determine the value of the car after repairs
• Subtract the amount after the accident from the amount before the accident

The remaining amount is the diminished value of a vehicle.

How To Calculate Diminished Value in Colorado

To calculate diminished value in Colorado, calculate the vehicle’s fair market value both before and after the accident. Colorado law allows accident victims to collect diminished value compensation. You should add an amount for diminished value and include it in your claim for compensation and the cost of repairs.

How Does An Insurance Company Determine The Value Of Your Car?

An insurance company has several methods to determine the diminished value of your car. They might look at third-party resources, like Kelley Blue Book and Edmunds. In addition, the insurance company might look at similar vehicles recently sold in the area. They may consider the price you paid for the car, wear and tear, major repairs, and any accidents that have happened since you bought the vehicle.

Remember, they’re determining the value of your car before the accident. They don’t look at the cost of replacing the vehicle or even what you paid when you bought it. Instead, the insurance company wants to know what your vehicle was worth on the day of the crash compared to what it’s worth now.

Colorado Diminished Value Claims

Colorado has a long history of allowing diminished value claims in third-party car accident actions. When you’re the victim of a car accident, you may bring a claim to the insurance company of the driver at fault for the accident. Colorado law allows you to collect compensation, not only for the costs of restoring your vehicle to a drivable condition but also for the fact that your vehicle is reduced in value.

In fact, the Colorado Supreme Court has affirmed the right to collect for diminished value in two old, long-standing cases that are still valid law today. In the Trujillo v. Wilson case from 1948, the court said that repair costs are separate from diminished value. The court noted that the State of Colorado recognizes diminution of value claims in a third-party car accident tort claim.

As a result, Colorado’s Pattern Civil Jury Instructions instruct juries on how to calculate diminished value. Specifically, they direct jurors to award compensation equal to the difference between the property’s market value immediately before and after the accident.

Since insurance companies must follow Colorado law, they should also include the diminished value of your vehicle in any insurance settlement.

How To Get The Most For Your Diminished Value Claim In Colorado

Insurers are contractually obligated to pay claims fairly and in good faith. If they refuse to pay your claim in good faith, you don’t have to give up. You can negotiate with the insurance company. You can also bring a claim in court for fair compensation as long as you do so within Colorado’s statute of limitations.

Insurance companies have two techniques for underpaying property claims.

First, they might use a depressed pre-accident value by artificially deflating your car’s pre-crash value. They do this by over-depreciating its value since you purchased it.

Depreciation takes into account the following factors:

• Vehicle year, make, and model
• Mileage
• Condition due to wear and prior accidents
• Present market value

When you file your claim, the insurer will ask your attorney about the vehicle’s pre-accident condition. Few people can claim their cars were in excellent condition, as this status is generally reserved for brand-new vehicles.

Instead, insurers usually assign a good, fair, or poor condition. This diminishes the vehicle’s pre-accident value and, consequently, the payout you receive. The insurer will argue that the vehicle’s condition cannot worsen after a crash if it was already in poor condition beforehand.

Another technique insurers use is to inflate its post-accident condition. If the vehicle is still in good condition after a crash, they might say the collision caused a minimal reduction in value.

Fortunately, the insurer must provide its diminished value calculation, including the pre-and post-accident values it used. To challenge the calculation, you and your lawyer will need to gather evidence of the vehicle’s pre- and post-crash condition.

If the insurer accepts your evidence, your lawyer can negotiate a better payout. If they disagree, you must file a lawsuit in a Colorado court.

How Our Colorado Attorneys For Car Accidents Can Help

Have you been in a car accident in Colorado? Is the insurance company trying to give you the run around regarding diminished value? You have rights. Our Colorado injury lawyers can help.

When you work with the Colorado legal team of Bachus & Schanker, you get a trained, experienced, and passionate team of advocates fighting for you. We know how to help the insurance company recognize that they owe you fair payment for your diminished value claim and any car accident injuries you may have. We don’t stop until you have the compensation that you deserve.

We are a fully equipped law firm devoted to representing deserving accident victims. We are conveniently located near you in Denver, Fort Collins, Colorado Springs, Aurora, Englewood, and throughout the state of Colorado. Our attorneys are ready to serve you and fight for the compensation you deserve. Call us today for a free and confidential consultation about your claim.