How Is Diminished Value Calculated After an Auto Accident?

Many drivers think repair costs are the only financial loss they face after a car accident. However, what most people don’t realize is that even after professional repairs, their vehicle likely won’t have the same market value as it did before the crash. This loss in resale value is known as diminished value—and it can cost car owners thousands of dollars.

You have the right to file a diminished value claim against the at-fault driver’s insurance if the accident wasn’t your fault. But insurance companies won’t offer this compensation unless you demand it. Even then, they may try to undervalue your claim.

This guide will explain:

• What diminished value is and why it matters
• How insurance companies calculate diminished value
• Louisiana’s laws on diminished value claims
• How to file a claim and increase your chances of success

If you live in New Orleans, Louisiana, and have been in an accident, this information is crucial to ensure you don’t leave money on the table when selling or trading in your vehicle.

What Is Diminished Value?

Diminished value refers to the difference in a car’s market value before and after an accident. This loss of value can persist even after repairs. Once a vehicle has been in a reported accident, it automatically becomes less desirable to potential buyers, even when fully restored.

Let’s say you own a 2022 Toyota Camry with a market value of $30,000 before an accident. After getting it repaired, the car looks brand new—but when you go to sell it, dealerships and private buyers are only willing to pay $25,000 because the accident history lowers its appeal. The $5,000 loss is your diminished value.

“Even if your car is fully repaired, its accident history can lower its resale value by thousands of dollars. Filing a diminished value claim helps you recover this financial loss.”

Many drivers never file for diminished value compensation. Why? Often because they don’t know about it. But if you were not at fault for the accident, you deserve to be compensated for this loss—just like you would for your medical bills and car repairs.

Types of Diminished Value

There are three main types of diminished value claims. Understanding them can help you determine how much money you might be owed.

Immediate Diminished Value

This type of diminished value refers to the drop in a car’s market value immediately after the accident but before any repairs. This loss reflects the fact that a damaged car is worth significantly less than a functioning one.

Insurance companies rarely use immediate diminished value in claims. Most focus on post-repair value losses instead.

Inherent Diminished Value

This is the most common and widely accepted type of diminished value claim. It refers to the loss in resale value due to the car’s accident history, even if repairs were done perfectly.

Buyers and dealerships often prefer cars with clean histories. Thus, a repaired vehicle with an accident record will always be worth less than a comparable vehicle that was never in an accident.

Repair-Related Diminished Value

This occurs when improper repairs lower a vehicle’s value. If a repair shop uses aftermarket parts instead of OEM (original equipment manufacturer) parts, or if the car still has minor structural or cosmetic issues after repairs, its market value will drop even further.

“Even if your car looks great after repairs, using non-OEM parts or failing to fix minor defects can lead to repair-related diminished value claims.”

How Is Diminished Value Calculated?

Insurance companies use different methods to calculate diminished value, but the most common is the 17c Formula.

Understanding the 17c Formula

Insurance companies developed the 17c Formula as a standardized way to estimate diminished value. Here’s how it works:

1. Determine the car’s pre-accident market value: This is usually based on the Kelley Blue Book (KBB) or NADA Guides estimates.
2. Apply a 10% base loss cap: Most insurers automatically assume that the maximum diminished value is 10% of the car’s pre-accident value.
3. Adjust for damage severity
   1. Insurers apply a percentage reduction based on the level of damage:
   2. Minor damage: 0.25 multiplier
   3. Moderate damage: 0.50 multiplier
   4. Severe damage: 1.00 multiplier
4. Adjust for mileage: Higher-mileage vehicles get an additional deduction, as they are already depreciated.

Here’s an example:

• Car’s Pre-Accident Value: $30,000
• Base Loss (10% Rule): $3,000
• Damage Severity Multiplier (Moderate Damage – 0.50): $1,500
• Mileage Deduction (High Mileage – 0.80): $1,200

Final Diminished Value Estimate: $1,200

“Most insurers use the 17c Formula, but it often undervalues claims. Seeking an independent appraisal can help you fight for fair compensation.”

Diminished Value Laws in Louisiana

Comparative Fault in Louisiana

Louisiana follows a comparative fault rule under La. Civ. Code Art. 2323. This means that if you were partially at fault for the accident, your compensation may be reduced based on your percentage of fault.

“If you were 20% responsible for the accident, your diminished value compensation will be reduced by 20% under Louisiana’s comparative fault rule.”

Who Can File a Diminished Value Claim?

• If another driver was at fault, you can file a claim against their insurance.
• If you were at fault, your insurance will not cover diminished value unless you have special coverage.

Time Limit to File a Claim in Louisiana

Louisiana has a one-year statute of limitations for diminished value lawsuits. If you wait longer than 12 months, your lawsuit will be dismissed.

“Under Louisiana law, drivers have one year from the date of the accident to file a diminished value lawsuit.”

How to File a Diminished Value Claim in Louisiana

1. Get a professional appraisal to estimate your diminished value.
2. Collect all necessary documents, including accident reports, repair receipts, and pre-accident value estimates.
3. Submit a demand letter to the at-fault driver’s insurance.
4. Negotiate with the insurer—expect them to offer less than what you’re owed.
5. Hire a lawyer if the insurer refuses to pay a fair amount.

Comparison of Diminished Value Types

FAQs About Diminished Value Claims

What is a diminished value claim, and why is it important?

A diminished value claim allows you to recover the loss in your car’s market value after an accident, even if it was fully repaired. You may lose thousands when selling or trading in your vehicle if you don’t file this type of claim.

Who can file a diminished value claim in Louisiana?

If another driver was at fault, you can file a claim against their insurance. However, at-fault drivers usually cannot recover diminished value under their insurance policy.

How do I prove my car’s diminished value?

You need an independent appraisal, repair records, and market value comparisons to show your car’s worth before and after the accident.

What if my insurance company denies my claim?

If your claim is denied or undervalued, you can negotiate, provide further evidence, or hire an attorney to take legal action.

Get Help with a Diminished Value Claim in Louisiana

Many Louisiana drivers lose money after accidents simply because they don’t know about diminished value claims. If you’ve been in an accident, your car will never be worth the same again—but you may have the legal right to recover that lost value.

Insurance companies won’t tell you about diminished value claims because they want to pay as little as possible. That’s why knowing your rights and taking action before the one-year deadline runs out is essential.

At Alvendia, Kelly & Demarest Law Firm, we help accident victims in New Orleans and across Louisiana fight for the compensation they deserve. If you believe you’re owed money for diminished value, contact us today to discuss your case.