Category: Car Accident

Driving a car is practically a necessity in today’s world. We use automobiles to get to work, go shopping, and for leisure activities. At the same time, driving is inherently dangerous and car accidents can happen. When a collision causes damage to your vehicle, you may be wondering how this affects the value of your car.

Generally speaking, cars that have been in accidents experience a loss in value. This is true even if the vehicle gets fully repaired. These days it is easy for potential buyers to obtain a vehicle history report. If someone sees that a car has been involved in a collision, research shows that they are less likely to purchase it for the same price as a car that has not been in an accident.

This reduction in value is referred to as “stigma damage.” Now, California is what is known as a “diminished value” state. This means that when another driver is found at fault for damaging your car, you are entitled to collect the difference in reduced value after the accident. This would include the loss in value due to the stigma damage. The rule is based on the principle that you should be put back in the financial position you were in before the accident.

However, it is important to note that your insurance company may not cover diminished value. Instead, policies typically focus on the cost of repairs alone.

Calculating Damages for Diminished Value

The purpose of a diminished value calculation is to allow you to recover more than the cost of repairing your car. If you can prove that the car lost value, the amount you would be entitled to receive from the other driver is the difference in the car’s fair market value before and after the accident.

Now, fair market valueis calculated as the highest price a buyer would be willing to pay for your car. This assumes that there is no sales pressure involved. It also assumes that the buyer has been fully informed as to the condition of the car.

For example, assume that your car was worth $10,000 before the accident. Next, assume that repairing the damage from a collision would cost $1,000. Finally, assume that once repaired, your car would have a fair market value of $7,000. In this case, you would be entitled to recover from the other driver $4,000. This number represents the $1,000 in repairs, plus $3,000 in diminished value ($7,000 – $4,000).

Calculation When Vehicle is Beyond Repair

In some cases, a vehicle is damaged so badly that it cannot be repaired. This would also be the case if the cost of repairs would be more than the vehicle is worth. In these situations, you are again entitled to collect the fair market value before the accident and after the accident. Note that the fair market value is calculated immediately before the accident.

Insurance Coverage

It is important to note that so far we have been discussing your legal right to sue another driverfor damage to your car. However, the rules are different when you are either at fault for an accident or the damage is not caused by another motorist. Assuming you have insurance, the amount you can recover depends on the limits in your policy.

In most cases, this would not include amounts to compensate you for diminished value. This is because the process is governed by contract law. In cases where another driver is at fault, the matter is governed by personal injury law.

For example, assume you have a comprehensive coverage policy. Next, assume that a tree falls on your car during a storm, damaging the hood and windshield. If the repairs on the car are $3,000, this is the amount the insurance company would pay. This is true even if your car lost $1,000 in fair market value after the incident.

Other Considerations

Note that you must have a valid claim against another driver to sue for diminished value. This requires that you prove that he or she was at fault for the accident. In cases where the driver has insurance, you will likely be contacted by an insurance company representative.

There may attempt to get you to settle your claims for a certain dollar amount that may or may not take into account diminished value. For that reason, it is best to talk with an attorney that has experience with these types of cases. The attorney can work with a diminished-value appraiser to evaluate your situation and help you get the money you deserve.