Diminished value refers to the loss in value of a car after being involved in an accident. Even after being repaired, a car with damage history can make its resale value lower and depreciate its value. In layman’s terms, “diminished value” means the difference in value between a vehicle that has never been damaged and the same vehicle after it has been damaged, but has been properly repaired. Most of the time there is no major difference, but sometimes the change in value is tremendous.

If you are in an accident and your car is damaged by the fault of another driver, you can file a diminished value claim to help offset the vehicle’s lost worth. For example, if the car was worth $30,000 before the accident and after repairs, its market value dropped to $25,000, the insurance company of the at-fault driver may be responsible for paying you $5,000 to cover the depreciation. Filing a diminished value claim is important because you can’t remove the accident’s history on the vehicle. In our example, when buyers examine a car’s history report, they may be less likely to pay the full $30,000 knowing that the vehicle has incurred physical damage. Therefore, a diminished value claim entitles you to some of that inherent loss of value that occurred from the accident.

There are a couple ways to determine what a car’s diminished value is. The cheapest way is to use an online website like Kelley Blue Book to determine the car’s value before the accident. If you compare that to the vehicle’s trade-in value from a car dealership, the difference represents the diminished value of the car. However, the dealership’s trade-in value may not be the most accurate or reliable rate, as they are ultimately

looking to resell the car in the future. Because of this, a second option is to receive an appraisal from a professional third-party source. An appraiser specializes in diminished value claims and will examine all aspects of the vehicle to provide an unbiased estimate of its worth. Whichever way you decide to examine your car, it is important that you get a written document showing the calculated diminished value to strengthen your negotiations with the insurance company.

Keep in mind the insurance company normally will not voluntarily solicit a diminished value claim but, when confronted with the proper documentation, they will consider it. To file a diminished value claim in North Carolina, you typically send a letter to the insurance company requesting the diminished value that you determined. Remember to state that the accident was caused by the negligence of their insured driver and to include any relevant paperwork and photographs. If an agreement can’t be reached, this North Carolina statute § 20-279.21 allows you and the insurance company to hire third-party appraisers to reach a new agreement. This only works if the difference between the two parties diminished value is greater than $2,000 or 25% of the car’s market value. Known as invoking the appraisal clause, both you and the insurance company have 15 days to agree with the compromise decided by the appraisers. If all else fails, you can file a lawsuit against the at-fault driver and their insurance company over your diminished value claim.