Assume that you are buying a car and you have to choose between two similar make and models. If one of the cars has been damaged in a car accident and the other has never been involved in an accident, would you value the cars at the same price?

Most people wouldn't do that because a car loses its value after it has been involved in an accident. The difference between the value of the car just before the accident and the value of the car just after it has been damaged in an accident and fixed is known as the diminished value of the car. The difference will be there even if the accident car has been perfectly repaired.

There are three main forms of diminished car value:

Inherent Diminished Value

Inherent diminished value is the difference between the value of the car just before it was damaged in the accident and the value of the car after it has been damaged in an accident and repaired.  This loss of value is there because even if a car has been perfectly fixed after an accident-related damaged, nobody will pay its pre-damage value because it will always have the accident tag. This loss of value is due to people's perception of the car, and perception is a powerful tool when it comes to appraising cars (or anything for sale, for that matter).

Immediate Diminished Value

This is the difference between the value of the car just before the accident and the value of the car immediately after the accident before the car is repaired. For example, if your car's windshield cracked after a head to head collision, then the diminished value of the car will be the difference between the value of the car just before the collision and the value of the car with the cracked windshield.

The immediate diminished value is usually the biggest of the diminished values because it is calculated before the damaged car is fixed, and the value of a car that has been damaged in an accident isn't much. However, it isn't usually used because people don't sell accident-damaged cars before repairing them.

Repair Related Diminished Value

Repair related diminished value is the difference between the value of the car just before the accident and the value of the car after it has been damaged in an accident and repaired, but not perfectly repaired. Repair related diminished value arises because perfect car repair is not always possible. For example, the mechanic may use an aftermarket or used a part with less value than the OEM (original equipment manufacturer part) or the mechanic may just fail to do a high-quality repair of the car.

Contact a company, like United Counties Insurance Group, for more help.