What Is Diminished Value?
Diminished value (DV) is the difference between what your car was worth before an accident and what it's worth after repairs. Even with flawless repairs, a vehicle with an accident on its history report (Carfax, AutoCheck) is worth less than an identical vehicle with no accident history.
Think about it from a buyer's perspective: if you had two identical cars at the same price, one with a clean history and one showing a prior collision, which would you choose? That price difference is diminished value.
Types of Diminished Value
- Inherent Diminished Value: The most common type - the automatic loss in value due to the accident appearing on the vehicle history report, regardless of repair quality
- Repair-Related Diminished Value: Additional loss if repairs weren't done properly or with OEM parts
- Immediate Diminished Value: The difference in value immediately after an accident, before any repairs (rarely used)
In most states, you can only claim diminished value from the at-fault driver's insurance company, not your own insurer. This is a third-party liability claim. A few states allow first-party DV claims, but most don't.
Diminished Value by State
State laws vary significantly on diminished value claims. Here's a quick overview of where DV claims stand:
| State Category | Third-Party DV | First-Party DV | Notes |
|---|---|---|---|
| Most States | Allowed | Not Allowed | Can claim against at-fault driver only |
| Georgia | Allowed | Allowed | Most DV-friendly state |
| Michigan (No-Fault) | Limited | Not Allowed | No-fault complicates DV claims |
| California | Allowed | Not Allowed | Must pursue at-fault party |
California recognizes diminished value as a legitimate damage claim under Civil Code Section 3333, which provides for recovery of all detriment proximately caused by a wrongful act. You can pursue a DV claim against the at-fault driver's liability insurance.
However, California courts generally don't allow DV claims against your own collision coverage (first-party claims) because collision coverage is limited to "direct and accidental loss" - the physical damage itself.
You cannot claim diminished value if you were at fault in the accident. DV claims require someone else to be liable for your vehicle's loss in value.
How to Calculate Diminished Value
There's no single "correct" formula for diminished value, but several methods are commonly used:
The 17c Formula (Insurer Method)
Many insurance companies use a formula from a Georgia court case called the "17c" formula. It calculates DV as:
- Start with your vehicle's pre-accident value
- Multiply by 10% (assumes max DV is 10% of value)
- Apply a "damage multiplier" based on severity (0.00 to 1.00)
- Apply a "mileage multiplier" (older/higher-mileage cars get less)
This formula typically produces the lowest possible DV estimate. It caps loss at 10% and then reduces it further. Real-world diminished value, especially for newer vehicles, is often much higher. Don't accept a 17c calculation as your final number.
Actual Market Value Approach
A more accurate method compares actual market data:
- Find your car's pre-accident value using NADA, KBB, or dealer quotes
- Research what similar vehicles with accident history actually sell for
- The difference is your diminished value
Studies suggest vehicles lose 10-25% of their value after a moderate accident, with luxury and newer vehicles losing more.
Professional Appraisals
The strongest evidence comes from a certified diminished value appraiser who will:
- Physically inspect your vehicle and repair documentation
- Research comparable sales data
- Provide an expert report usable in court
- Potentially testify if you need to sue
Professional DV appraisals typically cost $200-400 but can be worth it for claims over $2,000.
Newer vehicles, luxury brands, lower mileage, and structural damage all increase DV. A 2-year-old BMW with frame damage might lose 20%+ of its value, while an 8-year-old economy car with minor fender damage might lose only 5%.
How to File a Diminished Value Claim
Follow these steps to pursue your DV claim after the at-fault driver's insurance has paid for your repairs:
- Wait for repairs to be completed. You can't accurately assess diminished value until you know the full extent of the damage and have documentation of all repairs performed.
- Gather your documentation. Collect the accident report, repair invoices, photos of damage, your vehicle's pre-accident value estimate, and the Carfax or AutoCheck report showing the accident.
- Calculate or obtain a DV appraisal. Either use the market comparison method yourself or hire a professional appraiser for larger claims.
- Send a demand letter. Write to the at-fault driver's insurance company (not your own) requesting the diminished value amount. Include all supporting documentation.
- Negotiate. The insurer will likely offer less than your demand. Be prepared to counter with evidence supporting your valuation.
- Consider small claims court. If negotiations fail and your DV is under your state's small claims limit (often $5,000-10,000), filing a small claims case against the at-fault driver can be effective.
California's small claims court limit is $10,000 for individuals ($5,000 for businesses). This is often sufficient for DV claims. You cannot have an attorney represent you in California small claims court, which levels the playing field against insurers.
The statute of limitations for property damage claims in California is 3 years from the date of the accident (Code of Civil Procedure Section 338).
Building a Strong DV Claim
Your demand package should include:
Essential Documents
- Demand letter stating your claim amount and legal basis
- Police report establishing fault
- Repair invoices showing the extent of damage
- Before/after photos of your vehicle
- Vehicle history report (Carfax/AutoCheck) showing the accident now appears
- Pre-accident value documentation (KBB, NADA, dealer quotes)
- DV calculation or appraisal
Strengthening Evidence
- Dealer quotes showing what they'd pay for your car now vs. pre-accident
- Listings of comparable vehicles with and without accident history
- Industry studies on diminished value percentages
- Your vehicle's original window sticker showing MSRP and options
File your DV claim promptly after repairs are complete. Waiting too long weakens your claim, as insurers may argue the vehicle's value decreased due to time and mileage, not the accident.
How Insurers Fight DV Claims
Be prepared for these common insurer tactics:
"We Don't Pay Diminished Value"
Insurers often initially deny DV claims hoping you'll give up. Respond by citing your state's law recognizing DV as a legitimate damage claim. In fault-based states, the at-fault party's liability coverage must pay for all damages caused, including diminished value.
"Your Vehicle Was Fully Repaired"
Repairs don't eliminate diminished value. Point out that the accident now appears on vehicle history reports, and buyers pay less for cars with accident history regardless of repair quality.
"Our Formula Shows $X" (Low Amount)
If they use the 17c formula or similar, respond with your own market-based analysis or professional appraisal showing real-world values.
"You Need to Prove Actual Loss"
Some insurers demand you sell the car to prove you actually lost money. This is not required - diminished value is a present loss in your asset's value, not a loss you must realize through sale.
When to Seek Legal Help
Consider consulting an attorney if:
- Your diminished value claim exceeds small claims court limits
- The insurer completely denies any DV payment
- There are disputed fault issues
- You have other damages (injuries, rental costs) to pursue alongside DV
- The vehicle was leased and you face penalties
Related Guides
Need Help With Your Diminished Value Claim?
If the at-fault driver's insurer is refusing to pay fair diminished value, I can help you build a strong demand and pursue what you're owed.