Diminution of value happens when a vehicle is wrecked or damaged in an accident. The vehicle is then repaired or restored back to a road worthy condition. The insurance company agrees to pay for the repairs. You have your car back, but it's just not the same.

To help you see what has happened to your car's value, let's take a trip to the local car dealership. You've decided you may want to buy a car. You know what make and model you're looking for and you find two of them sitting on the dealer's lot. You start to compare options, mileage and features and find they are practically identical. As the sales person explains the features available on each car, you learn that one of the two cars was involved in an accident requiring substantial repairs. You are told that you can be assured that it is now good as new. But can you? Would you be willing to pay the same amount for a car that has been repaired?

In a recent study, 43% of the people surveyed would not buy a car that was in an accident. 42% said they would buy a car that has been in an accident but only if it was being sold for a large discount.

So what does that say about your car? Is it worth as much now that its been repaired as it was prior to the accident damage? Insurance companies have been wrestling with this question by their claimants for many years. Does your insurance company pay for diminished value? Has your car diminished in value because of the repairs required by an accident? How do you know?

You don't, but we do. AAG is your local diminished value professional. We make it our business to know. We attend auto auctions nationwide, to gather information on cars sold that have sustained accident damage. We then compare the sale price of these damaged and repaired vehicles to the sale price of those that have not been in an accident. This use of comparables gives us a percentage of loss of value for each type of automobile. The results tell the story.

During a recent dealer survey, conducted by AAG, we found that dealers diminished a car's value by 15% to 50% because it had been involved in an accident requiring significant repairs. Even though repairs have been made properly, there is a loss of value due to inherent diminished value. Should repairs be done poorly, and not up to industry standards, there may be additional repair related diminished value.
What are some of the factors that cause diminished value? Some of these factors, but not all are:
• Overall percentage of damage to the car versus its original value.
• Year, make or model.
• Any frame damage.
• Use of non-OEM parts. Parts that are not the original parts placed on the car by the manufacturer.

What does this mean for you?
The diminution of value is the difference between what your car was worth before the accident and after the repair.

Tax Deductible Diminished Value
An AAG certified appraisal can also assist you in determining the amount of loss you can claim as an itemized tax deduction on Form 4684 on your Federal tax return. The part of the loss not reimbursed by the insurance company is tax deductible. In many cases, the cost of the appraisal can also be claimed as an itemized deduction. Let AAG help you determine your car's diminished value.

Submitted by Landon Schadel, Certified Appraiser

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