Wrecked Car Damaged Vehicle Blog

RSS Grab DamageMAX RSS Feeds

Diminished Value (DV) Trends

Joseph Coupal - Monday, March 21, 2016

In Nathaniel Hawthorne's 1850 novel, The Scarlett Letter, the main character had to wear a scarlet "A" to let others know of her alleged sin. Fortunately today, people are not subject to public shame over a single circumstance or event. However, if their vehicle has been in an accident, databases worldwide track this information and make potential buyers aware of the vehicle's history. The more things change, the more they stay the same.

There are 25 million accidents in the U.S. each year. Only 15% of those are deemed total losses and paid out by insurance companies. The balance is repaired, driven unrepaired or scrapped. Repairing these vehicles is a multi- billion dollar endeavor and only half of the damaged vehicles are repaired with insurance company funds. That leaves 10 million with no financial assistance due to lack of insurance coverage, being at-fault or some combination thereof.

The emergence of Vehicle History Reports has made the accident the “star of the show,” creating another multi-billion dollar industry. CarFax in particular has dominated the consumer market with its FUD (Fear/Uncertainty/Doubt) marketing tactics. The American public is now convinced that a vehicle is “worthless” after an accident. They are correct-both literally and figuratively because “worth less” is indeed the case. This loss in value due to stigma is called "diminished value."

The psyche of today’s car buyer is dominated by CarFax in the U.S. and 9 out of 10 customers will not even look at a vehicle if it has accident history. This is not opinion, it is absolute and unless the selling dealer can provide proof that the vehicle is accident free, the vehicle is passed over. Most customers at the retail point of sale believe that alternative vehicle history reports like AutoCheck are controlled and manipulated by dealers to trick customers into buying a vehicle with accident history. This forces the dealer to provide multiple vehicle history reports to sell the same vehicle. As a result of this brand strength, virtually every business in the automotive supply chain touching a retail transaction has a significant need for extensive vehicle history reporting.

Below are high-level observations on how vehicle history reports impact industry players:

What is Diminished Value?

Imagine you’re going to BestBuy for the new Samsung 4K HDTV – the pinnacle of flat screens. The retail price is $18,499 and they are completely sold out, but they have a refurbished one they can sell you right now for the full retail price. Would you buy it? Seriously, only a fool pays full retail for a refurbished item so you quickly ask what the discount is and what specifically was wrong with the TV offered for sale. The salesperson tells you that he has no way of knowing what was wrong with the TV, just that it has been refurbished and the great news is that they can save you 10%. Now 10% is a nice gesture but hardly enough to make any consumer want to buy a “refurbished” high-ticket item, especially not knowing the extent to which the unit was repaired. Was it a power button?

Was it dropped and the screen shattered, or just an open box used for display at a show?

Now if 10% is obviously not enough of a discount to induce the buyer to consider a “refurbished” high-ticket piece of electronics, why would that suffice for an automobile? Refurbished is a very general term leaving much room for imagination when a very high degree of precision is required for collision repairs. The insurance company has all the details associated with the repair, to the penny, but will not share this information with vehicle history reporting agencies. They will, however, make certain that the claim is reported and specifically what the cause or nature of that claim was in general terms. Here within lies the problem because we don’t know as the buyer or seller of the vehicle downstream what the severity of the repairs were, so we are left to deal with the stigma of “refurbished.” The customer simply does not know the severity of the accident so they look for a vehicle with no accident history because there is no benchmark for exactly how much discount they are entitle to. The vehicle with accident history sits in dealer inventory a long time until discounted heavily to be sold. This discount is diminished value and CrashCalculator.com sets the standard for the calculation.

What We See

Here are a few statistics from 2015:

    - Average diminished value loss was $3,000
    - 85% of total diminished value loss was inherent or “stigma” related
    - Structural damage occurs to a very high degree (95%) at specific thresholds
    - Unitized construction: $3,500 - Full frame: $4,500 - Unitized on frame: $4,000
    - Airbag deployment results in structural compromise 98% of the time
    - Structural damage can exist and is not disclosed until the vehicle is inspected and processed* by an NAAA auction
    - Inherent and structural diminished value is not related to repair quality
    - Substandard or poor quality collision work will have a demonstrable effect on vehicle value but are unrelated to diminished value

Other Challenges

In our foreword we mentioned that 10 million accidents each year go unreported. Not all of these vehicles are repaired; some are scrapped or driven in their damaged state. Typically repairs are paid out-of-pocket by savvy owners seeking to avoid policy rate hikes plus the loss in value associated with accident history. The insurance carriers win as claims handling costs go down and everyone else downstream loses as the vehicles get sold or traded with the repairs being later documented through physical inspection. Auto Auctions most commonly see these repairs and report them as “frame/structural” damage announcements to AutoCheck.

Silos

AutoCheck is the only VHR with physical inspection data from auto auctions but it is limited to frame/structural damage announcements that are not shared with consumers. The damage associated with these findings at auction fall on the higher end of the severity scale because they occur when damage is greater than the average insurance reimbursed repair. AutoCheck and CarFax do not collaborate and there are hundreds of thousands of vehicles that have frame/structural damage in their history but no documented record of an accident in the vehicle history file. Experts estimate that there are 70-80 million vehicles on U.S. roads with accident history and 10% have suffered frame/structural damage.

Auto Dealers are required to disclose accident history in most states but if the vehicle was purchased in a “whole and undamaged state” how does the dealer ascertain it was in an accident? Paintwork does not prove that a vehicle was in a collision and, unless there is glaring evidence of collision damage or vehicle history, it is not easy for the dealer to find or disclose such evidence, which creates liability.

Conclusions

Diminished value is tangible and a very big problem in the U.S. – more than $250 billion!

The monetary damage created by diminished value runs deep and touches almost every vendor in used vehicle supply chain. Vehicle History Data Providers are working feverishly to add more data, more products and dig deeper to provide more of a picture and create more value. This information should be available to “all” sources if it is discovered or created and has an impact on the value of the vehicle. Insurance carriers are the largest collision repairer in the U.S. yet they shield the American public from the details associated with the actual repairs. The average collision repair performed is $3,500 and with more transparency, diminished value would be far less of a problem.

Data providers, auctions and insurance companies should also share data that has an impact on vehicle value. This would include but not be limited to:

    - Frame/structural damage
    - Flood damage
    - Fire damage
    - Smoke damage
    - Previous repairs
    - Substandard repairs
    - Collision repair work performed
    - Mileage discrepancy
    - Theft history
    - Salvage/total loss

About Us

Vehicle Valuation Systems provides best-in-class diminished value figures instantly without the need for a physical inspection. Consumers, dealers, attorneys and financial institutions use CrashCalculator.com for legal settlements, vehicle valuations and risk management. Our patent pending CrashCalculator.com allows users to do large volumes of diminished value reports quickly and easily.


Recent Posts


Tags

CarBUYERUSA.com selling a wrecked car auto insurance coverage sell your old car vehicle for trade-in selling a vehicle diminished value selling their damaged car Top Dollar sell the wrecked vehicle repairs value for your Damaged vehicle wrecked truck problem truck Maximum Value for damaged vehicle trade their damaged car Collision damaged vehicles broken vehicle salvage value collision repairs Branded title vehicles Trade-in Program car buyer we buy any car buy vehicles Problem vehicles average tow & storage bill wreck your vehicle buy salvage title vehicles vehicle values insurance company sell a car Diminished Vehicle Value sell your wrecked car online repairing the wrecked car trade-in storage or tow yard repair the vehicle buyer of damaged vehicles wreck sell cash only wrecked car sell the car car parts and components wrecked auto cash for your wrecked vehicle repairing the car vehicle value pre-cash value E15 engine damaged vehicle damaged vehicle for cash sell online High mileage vehicles buy the damaged vehicle sell junk cars old car Damaged Car selling a damaged car collision repair cash for the car selling any vehicle how to sell a damaged car wrecker services title processing procedures trade-in value buy a car consumer awareness legal for less DJ Harrington car into cash DamageMAX Difference salvage title vehicle cars for cash administrative fees wreck your car buy your vehicle damaged vehicle replacement retained by the owner repair your car buy a broken vehicle post-crash value buy wrecked cars D.J. trade replacement vehicle broken vehicles buy your wrecked car sell junk car wrecked car experts money for damaged vehicles We buy damaged vehicles sell damaged vehicles selling totaled vehicles insurance check flood damaged cars car is wrecked buys your wreck top dollar for your damaged vehicle repair your vehicle buy your wrecked vehicle sell car parts CAR-Diologist repair orders CarbuyerUSA sell vehicles Dr. Harrington sold value of your vehicle inoperable cars sell your damaged vehicle value buy damaged vehicles trade in CarFax Reports buy your wreck junk cash out negative carfax reports car for sale repair check leaking fluids buys any wrecked car owner retained sell it online sell your high mileage vehicle repair providers Call DamageMAX now! flood vehicles vehicle wrecked damaged vehicles cash for your vehicle used vehicle Inoperable vehicles fix the vehicle liability only settlement check buy your car for cash Clean-Break TIP free price quote repair the wrecked car cash offer buying a used car free quote sell your vehicle Selling your wrecked vehicle immediate cash offer industry insider Sell your car FAST buy your car auto body collision repair how much it costs wrecked vehicle wrecked vehicles repair a vehicle damaged by collision selling your wrecked car sell a damaged car Used vehicle values sell damaged cars cash offer on any damaged vehicle repair bills wrecked vehicle, problem vehicles car buying business un-repaired collision sell to damageMAX repairing your wrecked car repair your wrecked vehicle recycle car parts sell your Honda buys any car damaged vehicle vehicle for cash fast call DamageMAX high mileage vehicle We Total Any Car repaired car buyers AAA 12% in diminished value Body shops tow charges Sell your wrecked vehicle sell your wrecked car fix your car old junker DamageMAX.com towing company buy damaged cars vehicle's value buy any car car accident with no insurance damaged cars buy any wrecked vehicle damaged vehicle world repair an old or worn out vehicle Dr Harrington Donate Your Wrecked Vehicle sell a wrecked vehicle Sell your wreck wrecked your vehicle buyer of wrecked cars selling flood damaged cars car is not totalled damaged vehicle purchases buys wrecked cars DamageMAX cash out of your wrecked vehicle check for your wreck retail value problem vehicle wrecked your car Chicago selling their wrecked cars sell the vehicle value of the vehicle car's value reduction of resale value junk cars sell your damaged sell your car car for top dollar Honda sell your Honda for Top Dollar car parts for cash selling your damaged vehicle damaged vehicle to sell selling a damaged vehicle diminished value trends owner retained vehicle Sell DamageMAX your wreck repairing the vehicle selling flood damaged vehicles sell your vehicle as-is CarFax accident with no insurance

Archive



    GET A MORE PRECISE OFFER

    Does your car have body damage ?

    Number of airbags blown?

    Do you have a collision estimate?

    What is your insurance deductible?

    Is your car drivable?

    Do you have the car’s title?

    Does the vehicle have a salvage or rebuilt title?

    Does the vehicle motor run?

    YOUR CASH OFFER!

    CASH OFFER FOR YOUR
    DAMAGED VEHICLE

    $
    Fair market value prior to accident $


    Sell my damaged vehicle
    Check for my vehicle AS-IS

    This represents a cash offer for the vehicle as described by the seller.

    $
    Net Repair Check

    Proceeds for repairs that can be used for purchasing a replacement vehicle.

    $
    Deductible Payment

    Amount you save if you sell the car now

    $
    Cash Toward a New Vehicle
    $
    Out of Pocket Expenses
    ($0)