Diminished value claims, which allow recovery on the lost market value of a car that has an accident in its history, do not follow a precise formula. Texas allows recovery under a diminished value claim; but whether you can recover and how much of the value you can recover depends on many factors. Among those factors are the value of your vehicle before the accident and how effectively your attorney can negotiate. Before you begin negotiating any diminished value claim you should understand how to calculate your specific claim. Today’s post will deal with some key issues that will lower the value of a potential diminished value claim. To learn more about how diminished value claims are calculated you may first want to read this post.
Seven things that will hurt the value of your diminished value claim in Texas
1. The age of your vehicle
Technically, every car has a market value, even older cars in poor condition can sell for something. In practice, the insurance companies do not see it that way for diminished value claims. Most insurers put up a fight on a diminished value claim if the car is more than seven years old. From their financial calculation the diminished value on an older vehicle is not likely to be worth enough to take the claim to trial. The financial benefit to the insurance company to settle those claims is less than a newer car.
There is a certain logic to this position. Older cars are usually worth less than newer cars. If your car is only worth $3,000 the diminished value from a car wreck is likely very little. That may not get you very far in the legal system. Filing a case in the county or district courts with service is almost $500. That means you are likely going into the Justice of the Peace court which is cheaper.
What insurance companies do wrong is to take their arbitrary age cap and draw a line in the sand. Older cars are not necessarily in poor condition or without market value. This is particularly true with older luxury and high end vehicles, older cars with low mileage, older commercial vehicles and older cars in great shape.
2. The mileage on your vehicle
Just like when you buy or sell a car, the mileage has a big impact on the market value. Most people consider cars with low mileage better value than a car with greater mileage. More mileage means more wear which means more repairs in the near future. Again, this is a reason why one diminished value claim might be worth more or less than another. Although in their usual fashion, the insurance companies draw a line in the sand based on mileage. Many insurance companies insist they will not pay a diminished value claim on a vehicle with more than 100,000 miles.
You can recover diminished value on a car with more than 100,000 miles; but you may have to get yourself in that JP court to make your claim worthwhile. The mileage issue is more difficult to overcome because even the average consumer sees 100,000 as a major threshold. However, it is not a hard line like the insurance companies will have you believe. A car with 100,000 miles withand an excellent service record can command more value than a car over 100,000 with little servicing. Some cars also stand the test of mileage, particularly certain import brands. Those issues can be key negotiation points.
3. The make and model of your car
We’re getting more obvious here. A BMW is worth more than a Kia. It’s going to command a higher price on the market despite Kia’s improved image and quality. A car that started out more expensive and holds value longer in the used car market is going to have a greater diminished value, all other things being equal, than a car that started at a lower price point and sells for less on the used car market.
4. Where you live
Where you live also plays a role in the value of your car on the used car market. Cars in urban areas tend to command a higher market value over cars in rural areas because the overall cost of everything is more in urban areas and the used car market usually has greater demand. A car in Fort Worth usually will have a higher resale price than the same car sold in San Angelo. Even among neighborhoods the market value of a car can change.
That same car for sale in Hurst may have a slightly lower market value than what it may go for in Plano or Southlake. The the location of the vehicle also matters. Any good diminished value appraisal should include obtaining the sale price of similar vehicles around the same area where your car resides as part of the process of determining the diminished value on your car. It is a useful way to prove how the local market raises (or lowers) the value of your vehicle against the national standards set in broader pricing schedules, such as N.A.D.A. or Edmunds.
5. Prior accident history
A car with two accidents in its history is usually going to be worth less than a car with one accident. That makes sense, right? It would seem so, although there is not a clear consensus on how people value the difference between one accident and multiple accidents. Certainly a good argument can be made that a car that has had severe body and mechanical damage from two accidents might be worth less than a car that had one serious wreck and repair and one minor repair, such as a replaced bumper.
Again we will get back into the insurance company drawing a line in the sand. I have heard more than one claims adjuster say they will not pay out on diminished value claims on any accident after the first that appears in the car’s accident history. It’s not necessarily the case that there is no additional diminished value on the second accident but the insurance company is taking a stand based on the financial analysis.
It is going to be more expensive to litigate a diminished value claim where the loss from the first accident has to be calculated and removed from the diminished value caused by the second accident–and get a jury to understand that analysis–and chances are the lost value from the second accident is going to be small enough that it isn’t worth paying a lawyer plus experts to get to verdict. With that in mind the insurance companies know they can usually scare you off of a claim on that later accident.
If you drive a vehicle with a salvage title it will be nearly impossible to convince an insurer to pay on diminished value. Salvage vehicles are already so low in value on the market that whatever diminished value claim you have may be difficult to prove (since the car already has an accident history) and likely will not worth the cost of litigation. That is true even if you are driving a very nice vehicle with a salvage title. However, that doesn’t mean it can’t be done or that it shouldn’t be attempted.
6. Not understanding the value of your claim
Not understanding the full value of your diminished value claim creates a self-fulfilling loss of value. If you undervalue your claim to the insurance company than they are already starting off from a superior negotiating position because you have started the process by giving yourself a discount on the value of your claim. If your claim could be worth $5,000 but you tell the insurance company you will settle for $3,000 then you have given up 40% of the potential value of your claim just by how you presented your claim. That’s a $2,000 mistake.
A common way people undervalue their claims is by using these online diminished value calculators, which typically undervalue claims. A diminished value claim takes into account more than just the age, mileage and model of your car, but those are usually the major factors used in the online calculators. A qualified vehicle appraiser is far better at giving you an accurate, although sometimes overvalued, appraisal of your diminished value claim.
7. Letting the claims adjuster drive the negotiation process
Claims adjusters negotiate insurance claims as a profession. It’s what they do forty hours a week. They are usually very good at their job. Their job is not to negotiate a fair deal. The claims adjuster’s job is to settle your claim for as little as possible. That usually includes using techniques to frustrate you, confuse you and misrepresent the value of your claim. They learn how to use these techniques and become skilled in their use. Trying to settle these claims on your own puts you at a severe disadvantage. Most people are not professional negotiators and even if you are a skilled negotiator, unless you also happen to be a personal injury attorney you probably do not have a good sense of how litigation costs and processes affect the negotiation.
Claims adjusters are particularly loathe to pay on diminished value claims. Letting them control the negotiation process is a surefire way to come out with very little success. An attorney who deals with diminished value claims is your best weapon. I do not recommend people allow diminished value appraisers to help them negotiate claims with the insurance company. Many appraisers are offers to “help” negotiate claims with the insurance company. There are some ethical issues with appraisers representing claimants. It is arguably unauthorized practice of law. More importantly, while the appraisers have expertise in appraising vehicles, they do not have particular expertise in litigation.
If you have a diminished value claim in Dallas or Fort Worth, Texas
If your car suffered damage caused by a third party then you may have a diminished value claim. Depending on the value of your vehicle, the diminished value may be substantial even after repairs.