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Q: Car Depreciation After an Accident ( Answered 5 out of 5 stars,   2 Comments )
Subject: Car Depreciation After an Accident
Category: Business and Money
Asked by: buffalum82-ga
List Price: $20.00
Posted: 07 Mar 2006 08:24 PST
Expires: 06 Apr 2006 09:24 PDT
Question ID: 704567
Is there a standard for determining how much a car depreciates by
having been in an accident?
Subject: Re: Car Depreciation After an Accident
Answered By: tutuzdad-ga on 07 Mar 2006 08:50 PST
Rated:5 out of 5 stars
Dear buffalum82-ga

Thank you for allowing me to answer your interesting question. In
short, the answer is no, there is no standard for determining how much
a car depreciates by having been in an accident. A car only
depreciates in terms of fair market value (sometimes called Blue Book
price) based on the extent to which it cannot be restored. A vehicle
restored to its former condition is, for all intents an purposes,
considered undamaged and returned to it?s former market value, less
any normal depreciation due to regular use, wear, age, mileage, etc.

?After an accident, insurance companies will access the damage and
decide whether it makes more sense to repair or replace the vehicle.
When a car is totaled (heavily damaged or destroyed), insurers may pay
you the actual cash value (ACV) of the car. The ACV is calculated by
taking the replacement cost of the car and subtracting the amount of
depreciation on a car?s value.?
As you can see, any post-accident depreciation is relative to the
restoration of the vehicle based on the repairable damage as a direct
result of the accident. On the other hand, in general terms, a vehicle
that is not restored following an accident depreciates an amount equal
to the cost of repair and perhaps a bit more due to appearance but
this is often determined by the amount a potential buyer would be
willing to pay for a damaged vehicle.

When determining ?diminished value? - the value difference between
just before an accident, less the value just after the accident, but
before repairs ? the matter is also an issue of cost associated with
repairs rather than a standard guideline. Ok, so there?s no standard
guideline, but does that means that the car is actually worth less or
not? Well, the general consensus is that it is not worth less ? even
if repaired ? simply because it was involved in an accident at some
point, but again, the matter is one of opinion depending on who you

?Is this vehicle automatically worth less than it was before the crash
-- even if it was properly repaired? The answer is "probably not," but
some would argue otherwise? Reduced to its simplest terms, alleged
"inherent diminished value" has within the past five years become one
of the hottest issues in the insurance and collision-repair
industries. And how the issue is ultimately resolved could have a big
impact on the insurance-buying public -- those who buy car insurance,
and those who are in accidents that result in vehicle damage claims.?
I hope you find that my answer exceeds your expectations. If you have
any questions about my research please post a clarification request
prior to rating the answer. Otherwise I welcome your rating and your
final comments and I look forward to working with you again in the
near future. Thank you for bringing your question to us.

Best regards;
Tutuzdad-ga ? Google Answers Researcher


Defined above



Google ://


Diminished value






buffalum82-ga rated this answer:5 out of 5 stars
I rated the answer as 5-star because it directly addressed my question
and provided background, precedent and depth.

Subject: Re: Car Depreciation After an Accident
From: respree-ga on 07 Mar 2006 10:18 PST
From an accounting perspective, the answer is that depreciation is
unaffected by an accident (with a caveat).

From a practical standpoint, ordinarily, insurance would cover the
cost of repairs and the vehicle is restored to it's pre-accident

One scenario that would be an exception would be if the vehicle is
rendered operable (totalled) and the owner/company has elected not to
repair it.  In this case, the vehicle has reached the end of its
useful life and should be written off.  The net book value (cost minus
accumulated depreciation) is then written off, typically to an account
called Loss on Disposal/Abandonment of Fixed Assets (or similar).
Subject: Re: Car Depreciation After an Accident
From: frankcorrao-ga on 07 Mar 2006 11:18 PST
I think the key here is in the "inherent diminished value" part.  Yes,
if the car is repaired to exactly its original state, it *should* have
the same value.  However, we all know thats baloney. If your car shows
up on carfax as having been in a major accident, you will never get as
much for it because

1)you will never be able to adequitely prove to anyone, be it a
reasonable   demand or not, that your car actually is in the same
condition is was before.

2)It's an almost self-fulfilling prophecy because the buyer knows his
future resale value will be diminished by not having a clean carfax.

Take it from someone who had his car wrecked while it was parked. 
Dealers won't give you the same trade-in value and people won't give
you "fair" market value. I can't blame them because if i was on the
other side, i'd prefer not to buy damaged goods either.

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