What are diminished value payouts?

Diminished value concerns the value of your vehicle after it has incurred damage. So, if your vehicle has been damaged in a car accident, even if it gets repaired to “good as new” condition, the fact remains that the vehicle has a damage history. Even if your vehicle has all original and authorized parts for the repair, there will still be an impact on resale value.

Because your vehicle has been in an accident, the resale value will be diminished in the eyes of prospective buyers whether you like it or not, especially when compared to a vehicle that has no damage history.

For example

So, let’s say you want to list your car for sale, even if years have passed since any sort of damage, accident, or repair to the vehicle. You will face some diminished resale or trade value, even if the car is practically new.

When the new buyer checks out the history of the car, its maintenance and damage reports will show that there was an accident at some point. The buyer is now unwilling to pay anything close to the actual value of the car. Some may not even consider purchasing the car at all.

3 types of diminished value categories

Immediate diminished value: the difference in the resale/trade-in value of the car both before the accident and after the repair.

Inherent diminished value: assumes the vehicle has been repaired to its original condition, with the only acknowledgment being that it was involved in an accident.

Repair related diminished value: the lost value that is a direct result of the repair quality. Paint colours may not match or generic parts may have been used instead of originals; this type of repair job cannot bring your vehicle back to its original condition and represents a larger impact to its resale value.

Can I claim for any diminished value in Canada?

In several American states, insurance payouts related to diminished value are a standard section in auto insurance policies. Look at the state of Georgia, where insurance companies are required to issue a payment for diminished value even if the driver doesn’t claim it.

In Canada, unfortunately, insurance payouts for diminished values are not standard in any province or territory in our entire home and native land.

This makes accidental or collision damage all the more expensive in Canada. Because you have to disclose your vehicle’s damage history to prospective buyers if it is above $2,000, the diminished value is there forever; in most cases, you will never be able to get this back.

Diminished values in the Canadian press

Canadian drivers have gone to court over exceedingly large diminished valuations.

Ray Signorello, a man from British Columbia (with enough money for legal representation) took the Insurance Corporation of British Columbia (ICBC) to Supreme Court for a $16,000 diminished value claim on his $200,000 Mercedes-Benz convertible after a valet had damaged it at the airport, according to CBC.

He won his case, but others are usually less fortunate.

Another B.C. man, Bill Brown, went to court for $15,000 of damages to his Nissan. In the first ruling, Brown had won his case, representing himself against two insurance lawyers for the other party. The initial payout was for $6,000 in damages.

When the insurance company appealed, however, Brown got his payout reduced to $1,500 and had to pay the opposition’s legal costs. CBC reported that Brown was then $1,000 "in the hole" calling diminished value payments in Canada “the insurance claim you can’t make.”

As always, consult your insurance company for their regulations on diminished value payments, because every company is different.