Fair Market Value: A legal term meaning the highest cash or equivalent price estimated in terms of money which property would bring if exposed for sale in the open market place, with reasonable time allowed in which to find a purchaser buying with full know-ledge of its uses and purposes to which it is adapted and to which it is capable of being used, and neither buyer or seller being under any compulsion to buy or sell. The most probable buy-sell price would be its insurable value.

Actual Cash Value (ACV): An insurance term that usually means the sum of money required at the time of loss, to acquire a similar vehicle, as the property destroyed, less any appropriate depreciation for previous use

Liquidation Value: An impending sale with limited conditions. An orderly liquidation is planned disposal with price consideration. A forced liquidation is immediate disposal without price consideration. An absolute auction has no reserve price.

Replacement Value: A term used when describing the cost to replace an automobile in the exact or equivalent condition and with the same components, less any depreciation due to use or deterioration. This would include cost of custom fabrication, upgrading and any modification cost to duplicate the appraised automobile.

Salvage Value: Parts value without consideration of the specific vehicle the parts came from.

Hypothetical Value: The value of stolen or damaged vehicles, which are not always available for physical inspection, based on assumed conditions, sometimes contrary to fact, with limiting conditions.

Reconstructive Value: A vehicle’s value in pre-accident condition is estimated, based on it’s post-accident condition with applicable limiting conditions.

Provenance or Historical Value: An additional value assigned to a vehicle above it’s market value due to proven ownership, association, manufacture or show and racing history. If an older vehicle is in a moderate or severe accident, then a new paint job, battery, radiator or tires can increase it’s resale value and marketability.

The Value of The Vehicle At Hand

ACTUAL CASH VALUE/FAIR MARKET VALUE* is the price at which the property would change hands between a willing buyer and willing seller, neither being under any compulsion to buy or sell. Both parties to the sale having reasonable knowledge of relevant facts … in the most common market. Fair market value for the purpose of this appraisal is defined as the highest price in terms of a single cash payment of money, which the vehicle will bring if offered for sale on the open market place. A reasonable time is assumed to buy said vehicle, with full knowledge of all the adapted and potential best uses and possessing a specific purpose in mind to justify the investment. The relationship of both buyer and seller shall be at arms length. The market value estimated, and the costs used, is as of the date of a loss or other stated date of value

Diminished Value

If A Car Has Been Involved In An Accident, Is It Worth Less?

It is common knowledge that an automobile’s retail market value is diminished, after it has sustained moderate to major damage in an impact or loss of various types. This is not withstanding the fact that the sustained damages may have been properly repaired. Demands for payment to compensate a vehicle owner for the recovery of damages in excess of the cost to repair the vehicle, when the value of the vehicle has decreased due to it’s Diminished Value, are becoming more commonplace today. Most first party claims of this type (Insured/Policyholder) are specifically excluded within the “material damage” policy’s of most major carriers. Third party claims of this type (Claimant/Vehicle Owner) are not excluded, due to the fact that no contract of insurance would be in effect between the insurance carrier and the non-policy holding claimant who suffered the damages at the hand of an insured. This sounds pretty straightforward, but underneath this statement appears an imposing stance by most all major insurance companies in Europe and North America. The insurance carriers are adamant that when they pay to repair a damaged vehicle, then there exists no additional claim of damages for the vehicle. They believe that if a car is repaired properly, there is no Diminished Value simply because of the fact that the vehicle was involved in an accident. If it is restored to it’s pre-accident condition, they believe that there is no Diminished Value. That may be logical in most cases, but used car buyers are often not logical. If their given the choice between two identical used cars, except for the fact that one was in a major accident, it’s safe to bet that most all buyers would choose the car that was accident-free! Some industry authorities caution that in many cases, Diminished Value will be difficult to prove and that, at least in some cases, a wreck and subsequent repair may actually increase the resale value of the car. Some note that accident repairs can sometimes increase the value of a car.

Remember, Every Accident Is Unique!

The economic impact of an accident will depend on such obvious issues as whether a car has sustained cosmetic or frame/unibody damage and whether the car is a newer or older model.

The opposite is true for a new or near new luxury car involved in a moderate or major accident. Moreover, a new car has to have a huge amount of damage to be considered totaled or not repairable by an insurance company in the first place.

The rule of thumb used by most insurers is to total out a vehicle, if the cost of repairs exceeds the market value of the vehicle, less the salvage value of the vehicle in it’s damaged state. The majority of the insurance industry standards are as follows. Most insurance companies will spend up to 75% of the retail market-price of a vehicle, for the repairs. This is primarily due to the fact that damaged vehicles (salvage) are valued at around 25% of the pre-accident, retail value of the vehicle.

The record of some of the auto body industry’s ability to repair the more severely damaged vehicles, is questionable. In a number of cases, a number of body shops lack the expertise and equipment to properly repair vehicles that have moderate or major damages. With the certified and state of the art, fully equipped collision repair facilities that are operating in many areas, this scenario would be very unlikely to occur. Even if a car is fixed to the highest industry standards, that will not solve the problem of Diminished Value.

Diminished Value varies from as little as 10% to as much as 50% of the vehicle’s retail value. Many factors are relevant to each percent of the Diminished Value for a vehicle.