Your car is an important asset to your everyday life. It can be a collector’s item that you work on every day, or simply your method of getting to and from work. Regardless of your situation, if you own a car, you can agree that it is an object that you’ve spent hard-earned money on. When you’re no longer using your car, you’re going to want to get some money back for it. However, what happens if you get into an accident while you own your car? Will the value of your car decrease? Let’s take a look at what determines the value of your car, and what happens to it after an accident occurs.
How does an accident affect car value?
When you get in a collision, your car will likely go through some sort of rebuild to get back on the road. Unfortunately, when this happens, the value inevitably takes a hit. This will be the case even if the car is restored to working condition and repairs are done perfectly. This can be a rough hit to the pockets, especially since this loss is not covered by car insurance providers in Canada.
In the U.S., some states allow car owners to claim what is known as “diminished value.” This is essentially the decrease of value your car goes through after an accident. However, according to the Insurance Bureau of Canada, there are no provinces or territories in Canada that offer similar coverage. On top of this, insurance rules differ from province to province.
To further understand this, we must first take a look at the two main types of diminished value.
1. Inherent Diminished value
Inherent diminished value is the perceived loss of value following a car accident. This is assuming that the vehicle has been repaired to its original condition and is back to working condition. The only change is it now has the stigma of being in a collision. This stigma, unfortunately, may reduce the value for some people when they attempt to purchase it or trade their car in for it. In any event, it reduces the value of a vehicle compared to what the owner may have gotten before it was involved in a collision.
Repair-related diminished value occurs when the quality of the repairs that occur is questionable. Examples of this can include paint not being a perfect match. Alternatively, the parts used may be aftermarket parts as opposed to name-brand parts. The car may also make specific noises that weren’t there before the accident. In most cases, these repairs leave the vehicle with a definite loss in value.
What if I plan on selling a car that’s been in an accident?
If you’ve been in an accident with a car you’re planning on selling, you must disclose this. Owners are required to disclose any damage done to a vehicle if the damage exceeds $2,000 to potential buyers. On top of this, there are multiple vehicle history report sites in which potential buyers can check if a car has sustained major damage. Some examples of these include Carfax and Transport Canada.
Car Insurance, your car value, and direct losses
In Canada, being compensated for diminished value is a challenge. This is due to auto insurance policies being designed to mainly cover direct losses. This means that your company will pay for repairs to your vehicle to restore it to pre-collision condition. Alternatively, they declare it a total loss. This is considered the lower-cost option. If repairs end up costing more than your car value, then your insurance company will usually write it off.
This decision is entirely up to your insurance provider. They have the right to send the vehicle for repair or to rebuild it rather than offer a payout. More often than not, repairing it will be the cheaper option. When the repairs to your car are expensive, it can negatively affect the value of your car.
Is compensation for a car accident possible?
There are a few rare incidents in which Canadian insurance companies have quietly paid out diminished car value claims. This involves drivers having to fight the claims in court by suing either their insurance provider or the at-fault driver’s provider. While some insurance providers might negotiate settlements, you’ll have to first prove how much you will lose when you go to sell a vehicle.
Before asking your provider to compensate you for your vehicle loss, you should obtain a report that states the amount of value of your car both before and after an accident. You can do this by obtaining an appraisal from a service such as Carfax to get an unbiased opinion on your vehicle’s value. It is important to never base your car value solely on what a dealership may tell you.
In conclusion: Maintaining your car’s value
At the end of the day, the best way to maintain your car’s value is to drive safely. This will also, of course, result in you and the drivers around you remaining safe. If you are involved in a car accident that requires a major repair, it is important to understand your rights and find out how it can impact the value of your car. Once you have the required information, it is important to discuss concerns with your insurer. If you are in the market for a new car insurance provider or need to make a car insurance claim, contact us or request a quote today.
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