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How Much Does a Vehicle Depreciate After an Accident?

Depreciation is a term used by accountants to describe the loss in value of an asset. To calculate depreciation, you take the value at one point and subtract the value at a later point.

Vehicles are notorious for depreciating quickly. You have probably read that a new vehicle depreciates 10% immediately after you drive it off the lot. This happens because the vehicle immediately becomes a “used car” worth only 90% of what you agreed to pay for it. According to the IRS, vehicles depreciate about 20% per year until becoming worthless in their fifth year.

But what happens after a car accident?

Property Damage in a Car Accident

When you get hit in a car accident, the crash energy will:

Crash energy depends on the speed and weight of the vehicles. Heavy vehicles traveling fast will have more energy than light vehicles traveling slowly.

The energy will also depend on how the vehicles collide. A sideswipe has far less energy than a head-on collision. The most common type of crash, a rear-end collision, falls somewhere in the middle.

Factors that Determine Depreciation After a Crash

Since crash energy affects damage severity, every crash will have a different effect on the value of the vehicles involved. A severe crash could result in a total loss. When an insurer “totals” a vehicle, its value has depreciated to zero.

A minor crash might cause only a few hundred dollars in damage. For example, a fender bender in a parking lot might not affect the value of the vehicle after the damage is repaired.

Some factors that can affect the depreciation of a vehicle after a crash include:

  • Did the crash damage the frame, engine, or transmission?
  • Did the vehicle catch fire?
  • Was the vehicle repaired to its original condition?

If the crash damaged the frame or a critical system like the engine or transmission, your vehicle will depreciate at an accelerated rate. The life of the vehicle has been shortened; as a result, it loses value faster. Instead of losing 20% of its value each year, it could lose 25% or more of its value per year even after repair.

To discuss your crash and the losses you suffered, contact Shrader Mendez & O’Connell at (813) 360-1529 for a free consultation.

Posted in Car Accident