Diminished Value: What Is It?

There is not much worse than having a wreck in your car. It is even worse when the collision is not your fault. You have to deal with your insurance company, or worse the other parties insurance.

In many cases you have to mess with getting a rental car, take your car to the body shop, and then hope they do the job correctly. Perhaps the worst part of a wreck is lurking behind the scenes-the loss of value to your car. With all the databases out there to keep up with collisions, flood damage, odometer rollbacks, etc. there is just no doubt your car is not worth what it was previous to the wreck.

Imagine if you can, two used vehicles sitting on a car lot. They are the same year, similar mileage and equipment, but one has been wrecked, the other has not. If you are a shopper, which of the two cars are you going to choose? Of course, the one with a clean history report.

The rules vary by state, so keep that in mind, but many states like my home state, Texas, allow you to file a claim based on the loss in cases where you are not at fault. I have seen diminished value claims on expensive cars be over $50,000. Most are much less, but you don’t want to miss out on collecting this money, it is a legitimate claim because you will take a hit when you go to get rid of the car. Dealers look at a history report every single time they go to trade for a car.

Generally there are a couple of types of diminished value. One is repair related, meaning that the repair job was not properly done and the previous damage is detectable, even to an untrained eye. The other is inherent diminished value, meaning your car is not worth what it was before the wreck. Sometimes, both factor in.

Here is the problem with all this, there is no formula for figuring diminished value. There are experts out there, who for a small fee will give you a complete workup on the amount of loss you have suffered. If the damage is under $2000 or so, it is probably not worth hiring an expert. You can work out a settlement with the insurance company. In Texas, you can file a diminished value claim for up to two years from the date of loss.

In 2003, when I was still a Ford dealer, but also on the air in Dallas, I teased this subject by saying “coming up next, I’ll tell you a dirty little secret your insurance company doesn’t want you to know about”. I went to break, came back, explained the theory of diminished value, and the phones went crazy. A month later, that was still all anyone wanted to talk about. The Dallas Morning News picked up on the story and ran with it. One of the major insurance companies was so angry with me, they refused to let their insured people use my body shop.

If you are in Texas, there is no doubt insurance companies are required to pay diminished value claims, although often times they will try to say they do not pay them. If you are outside Texas, Google diminished value and your state, and read up on it or find an expert.

Remember, in most states, you cannot make a diminished value claim if the collision is your fault, and acts of God do not apply either, like hail or storm damage. If you have a valid claim and your state allows for diminished value, be sure to get your money!

  1. Harold 3 years ago

    I think you’re wrong about diminished value, “If you are in Texas, there is no doubt insurance companies are required to pay diminished value claims, although often times they will try to say they do not pay them.”

    Not if it says they won’t pay in your policy.
    I think I remember seeing a paragraph in my Farmers Auto Insurance Policy saying that they won’t pay for diminished value. If this is true then other insurance companies will have the same clause.

    • Michele Sanders 3 years ago

      I disagree and so does the Texas Board of Insurance, but I appreciate your input. I am careful what I write to know the facts and have followed this issue for over a decade.

      Jerry Reynolds, President
      Car Pro Radio Network

  2. Michael Spagnola 3 years ago

    Our experience with diminished value in California went like this. Hired an independent auto appraiser from Oregon that gave us a worthless report. Then we hired a company from Fort Pierce, FL that gave us a stellar report. The guy from FL charged half the amount of the guy in OR but we collected the full amount of diminished value from Travelers. Yes, we had to bring in a supervisor and make a complaint about the adjuster handling our case. Yes, we wasted $400 on the first appraiser. But it was worth it to collect almost $5K and finally be treated like intelligent people instead of stupid morons.

    • Michele Sanders 3 years ago

      That is often the case. Insurance companies do not make it easy. But for those that are patient, it is often worth the effort. Thanks for sharing your story!

      Jerry Reynolds, President
      Car Pro Radio Network

  3. Natasha 3 years ago

    I am dealing with this very issue right now. Someone hit my 2012 BMW 3 series on 8/28/14 as I was driving down the interstate in Houston. After 8 weeks in collision repair, I was told the car is ready for pick up tomorrow. My insurance company (Allstate) says they can’t get involved with the diminished value portion of my claim (even though they’re subrogating everything else from the negligent party insurance company – Fred Loya).The company that repaired my car (Auto Nation Collision) won’t do the diminished value evaluation – conflict of interest I suppose. Allstate won’t refer me to anyone and Fred Loya, huh? Any suggestions on who to contact to do the inspection in the Houston area?

  4. Hector Alvarez 11 months ago

    Jerry, I’m hitting my head against a stone wall -> Mercury Insurance Group. I’m in California; In April 2015 I was involved in a T/C, (not my fault, other driver pulled out from a side street and broadsided me). Damage to my 2013 Ford Taurus SEL was $6,372.00. Car was repaired, looks good, no issues (yet). Nonetheless, it still has been in a wreck and does not have the same value. The Defendant party and I both have Mercury.

    Here’s what Mercury is claiming: Calif. Civil Jury Instruction, 3903J “to recover damages for harm to personal property, the vehicle owner MUST PROVE the reduction in the automobile’s value OR the reasonable cost of repairing it, WHICHEVER is less. >>> In other words; you get the repairs or the diminished value, NOT BOTH!

    Mercury continues to refuse to pay the diminished value, despite my argument that nobody in their right mind would buy a car that was previously damaged when placed side by side with a similar undamaged car.

    Ant thoughts?

    Thank you. And have a Very Happy Christmas and New Year.


    FYI: I’m 69 years old and an Army Veteran.

    • Amy Plemons 11 months ago

      Hector, thank you for your service. Many insurance companies fight you on diminished value, others happily pay. I think you’ll need an expert on your side and I’ve had good reports on this company: https://www.collisionclaims.com

      Speak to them, I think worst case they can tell you if it is worth pursuing. I wish you the best. -Jerry Reynolds

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