It’s not news that car values depreciate dramatically. It gets even worse after an accident. Let’s say you’re driving your new car that has full coverage from your insurance company, and you get t-boned. Now if you decide to make a claim, your insurance company sends a claims adjuster to assess the damage, and how much the car is worth. Then, once they have determined your wrecked car’s value, they write you a check and go on their merry way.
How much does a wreck depreciate a car? The amount of money itself depends on the kind of car, but the general consensus is simple in this regard. A car with an accident in its history will be worth less than the same car without an accident, and that’s the way it is. The trade-in value to a dealership will be even less as well. Sometimes the car will decrease in value by its diminished value, which is calculated by the insurance company when they send an agent to look at your car.
The way insurance companies determine the diminished value of your car is what’s called the 17c Formula. Diminished value is the monetary difference between what the car was worth before the accident, and what it is worth after. The formula originated in 2001 in Georgia, following a lawsuit that saw State Farm as obligated to pay out 25,000 claims. In order to do this the 17c Formula was conceived, as a simple way to standardize the calculations across all of the claims. While this worked fine for this particular situation, the formula stuck and now some if not all insurance companies use it to determine the value of wrecked cars.
The formula is thought to be inefficient because it calculates the loss of value equally among all kinds of cars, which means a crashed Ferrari is appraised the same way as a crashed Honda Civic. Ultimately, the insurance companies give less than what they should with diminished value checks. Motorists are receiving checks for hundreds of dollars, when they should be in the thousands. Lots of sources on the internet provide the formula so you can use it to calculate your own car’s value based on 17c. However, the formula is thought to be so skewed that various groups exist for the sole purpose of petitioning 17c.
Luckily, you as a crash victim are not locked to this formula. The insurance companies may come at you with an offer that’s very low, but you can refuse it. The option you have is to hire a private appraiser to come and look at your wrecked car, and they can present the insurance company with a counter offer.
Be sure to read up on your insurance policy and rights before agreeing to whatever price your insurance company has offered.
Avid Formula 1 fan and motorcyclist, I enjoy chocolate chip cookie dough ice cream and long rides to the beach.