As we mentioned in Part One of this article, automobile insurance companies have a specific method they use to calculate the diminished value of a vehicle after an accident. According to the finance department at Atlantic VW (West Islip, NY), just about everyone uses a formula that is referred to as the “17c method.” Let’s take a look at it.
Calculating Diminished Value Using the 17c Method
1. Find your car’s “book” value. An easy way to do this is to go to https://www.edmunds.com/appraisal/ and input your car’s information. Fill out the various steps, including your make, model, mileage, and options. The website will give you estimate trade-in and sale values of your car. Insurance companies usually use this information to determine a fair starting value for your car.
2. Calculate the “Base Loss of Value.” Insurance companies commonly divide the average Edmunds value by 10 to arrive at a “Base Loss of Value.” This is, in their estimation, the largest amount of value that can be lost as diminished value. So for a $15,000 car, the base loss of value would be $1,500. This means that, at maximum, the diminished value after an accident and repair could be $1,500.
3. Multiply by the damage multiplier. After the Base Loss of Value has been set, the company then adjusts it for values specific to your vehicles. The first, the damage multiplier, assesses how damaged your vehicle was by the accident from 0, which represents no structural damage or replaced panels, to 1, which represents major structural damage. Multiply the number by your base loss of value to get your damage-adjusted diminished value.
- 1.00: Severe structural damage
- 0.75: Major damage to structure and panels
- 0.50: Moderate damage to structure and panels
- 0.25: Minor damage to structure and panels
- 0.00: No structural damage or replaced panels
- For example, if your car experienced moderate damage, you would multiply your Base Loss of Value of $1,500 by 0.5 to get $750, your damage-adjusted diminished value
4. Multiply by the mileage multiplier. Again, this relies on a set of values that are multiplied by the result of your damage-adjusted diminished value. The values are as follows:
- 1.0: 0-19,999 miles
- 0.8: 20,000-39,999 miles
- 0.6: 40,000-59,999 miles
- 0.4: 60,000-79,999 miles
- 0.2: 80,000-99.999 miles
- 0.0: 100,000
- So, if your car, with a damage adjusted diminished value of $750, has 65,000 miles on it, you would use the multiplier of 0.4 This would give you 0.4*$750, or $300.
5. Examine your result. The Diminished Value of your vehicle is the Base Loss of Value minus the damage and mileage adjustments. Keep in mind that the insurance companies may have somewhat different calculations.