How Much Does an Accident Affect a Car’s Value?

Being involved in a car accident is never enjoyable, and the effects can linger long after insurance claims are filed and the damage is repaired.

Cars that have been in accidents or otherwise damaged and repaired can be worth significantly less than those without any damage.

This accelerated depreciation can cause your vehicle’s value to drop up to 25% faster than it normally would.

This article explores how an accident can affect your vehicle's value and what you can do to minimize and potentially recoup some or all of the losses.

Does an accident affect a car’s value?

Yes, an accident affects a car's value. Even once your car has been repaired to like-new standards, it still carries the stigma of being involved in an accident.

This can cause potential future buyers to offer you much less than the car is worth, even though it is in functionally the same condition if no accident had occurred.

Any damage on record with an insurance company will appear when potential buyers request a Carfax or other report, affecting the price you can sell your car for.

Put yourself in the buyer’s shoes. Knowing a vehicle has been in an accident adds doubt and risk since you can't be sure the repairs restored it to its original condition. This lowers the price you’d be willing to pay, even if reputable shops performed the repairs.

This concept, known as diminished value, can wipe thousands off a vehicle's value after an accident. There are two types of diminished value:

• Inherent diminished value: This refers to the loss in value due to the car having been in an accident and subsequently repaired to like-new standards.
• Repair-related diminished value: Ideally, any damage should be repaired with identical parts from the car’s original manufacturer. Once the repairs are complete, the vehicle should be indistinguishable from the day it left the factory.

Will the value be affected if the damage is fixed and unnoticeable?

Sometimes. Very minor damage such as a cracked headlight or a wing mirror knocked off and replaced may not hurt your vehicle’s value, but more serious damage certainly can.

Repairs involving dented body panels and paint matching will usually affect your car’s value. This impact worsens as the severity of the damage increases, especially with structural damage and the replacement of major mechanical parts.

Many insurance companies use a formula known as “17C”, which helps decide whether the damage is worth fixing or whether the car should be considered a write-off and parted out/scrapped.

As the seller, you can use this formula to decide whether potential buyers are offering a fair price or trying to lowball you by using the car’s repair history to score a rock-bottom deal.

Additionally, any mechanical parts that need to be replaced should, ideally, be replaced with identical parts from the original manufacturer. Using aftermarket parts, or cheaper ones of a lower quality, can exacerbate the hit you’ll take on your vehicle’s value when it comes time to sell it.

Do I need to disclose if a car has been in an accident?

You should always tell potential buyers if your vehicle has been involved in an accident. If the cost of repairs exceeds $2,000, you are required to by law. Additionally, accidents involving two or more vehicles should always be reported to the police and both parties’ insurance companies.

How to calculate diminished value after an accident

The 17C formula that insurance companies use to calculate your car’s post-repair value dictates whether your provider decides to cover the cost of repairs or cut you a check for the diminished value and write the vehicle off.

Here are the factors that insurance companies take into account when applying the 17C formula to your vehicle:

• Value of the vehicle: This is the average value for a car of your make, model and mileage. It's obtained through impartial valuation services like Kelley Blue Book.
• 10% cap: This figure is the initial hit that the car’s value takes just because it has been involved in an accident and repaired. This can be thought of as the inherent diminished value mentioned above.
• Damage multiplier: This ranges from 0.0 (very minor damage—no damage to structure or panels) to 1.00 (severe structural damage).
• Mileage multiplier: This multiplier works on the fact that it’s more profitable to repair a new car with low mileage than an old one that may have been just a couple of years away from the scrap heap even if an accident never occurred.

Vehicles with less than 29,999 km on the clock generally don’t take a hit, while ones that have travelled over 160,000 km see the largest drop in value.

Here’s how the mileage multiplier is calculated: 1.0 = 0–29,999 km 0.8 = 30,000–64,999 km 0.6 = 65,000–94,999 km 0.4 = 95,000–129,999 km 0.2 = 130,000–159,000 km 0.0 = 160,000+ km

So, if your vehicle was worth $10,000 before the accident, needed moderate repairs and has 70,000 km on the clock, the calculation would look like this:

The initial 10% drop would mean that the maximum value it will lose is $1,000.

For moderate damage (0.5 on the scale), we would multiply that $1,000 by 0.5, resulting in $500 of value lost.

Then we would apply the mileage multiplier to $500. Having 70,000 km on the clock means multiplying $500 by 0.6, rendering the total $300.

In summary, although your car was repaired to like-new standards, it is now worth $300 less than if it had not been damaged and repaired at all.

Does it make a difference if I’m at fault?

It certainly does. Unlike certain US states, Canadian automotive insurers do not allow drivers to claim for diminished value, instead only providing remuneration for “direct losses” like medical expenses and repair costs.

Diminished value is considered an indirect loss and is not usually covered.

Drivers seeking to recoup some or all of their vehicle’s diminished value often need to take the other driver and their insurance company to court, and sometimes even sue their own insurance company. This process can be costly and doesn’t guarantee that you’ll receive the diminished value in full or even in part.

One thing that certainly won’t help your chances of legal success is being at fault for causing the accident in the first place.

Before starting legal proceedings, it’s important to accurately determine your vehicle’s value using the formula above and decide if it’s worth going to court. Remember that legal fees can eclipse any money awarded for diminished value.

Diminished value is not usually covered by Canadian insurance companies, but in some cases, drivers have been able to reach an agreement or settle out of court. This is handled on a case-by-case basis.

If you’re thinking of suing for the diminished value post-repair, it’s important to speak to a qualified legal advisor and have a good idea of the value of your car.

We hope this article has provided you with valuable information to navigate what can be an extremely stressful time. Armed with all the relevant facts, you can now enter negotiations confidently and hopefully secure the best price when it comes time to sell your vehicle.