How to calculate the reduced value of your car

The main reason a person needs to calculate the reduced value of a car is to file an insurance claim after an accident. Naturally, if the car can no longer be driven or has significant cosmetic damage, it is not worth that much.

Regardless of who is at fault, whether your insurance company or someone else is obligated to reimburse you for the cost of your car, it is in the interest of the insurance company to calculate the lowest possible value for your car.

Most insurance companies use a calculation known as "17c" to determine the cash value of your car after a crash. This formula was first used in a Georgia claims case involving a sovkhoz and takes its name from where it appeared in the court records of that case – paragraph 17, section c.

Formula 17c was approved for use in this particular case, and it didn't take long for insurance companies to pick up on the tendency to get relatively low values ​​using this calculation. As a result, the formula has been widely adopted as an insurance standard, despite the fact that it has only been applied to one damages case in Georgia.

However, after a crash, you will benefit more from the higher reduced cost number. That's why it's important to know how the insurance company that pays your claim will get the current value of your car and its actual value if you sell it in its current condition. If, after calculating the reduced value of your car in both ways, you find a large discrepancy between the numbers, you can negotiate a better deal.

Method 1 of 2 Use Equation 17c to find out how insurance companies calculate the reduced cost.

Step 1: Determine the selling price of your car. The selling or market value of your vehicle is the amount that NADA or Kelley Blue Book determines if your vehicle is worth it.

While this is a number that most people would consider appropriate, it doesn't take into account how the cost varies from state to state, as well as other factors. The number obtained in this way is also not in the interests of the insurance company.

Image: Blue Book Kelly

To do this, visit the NADA website or the Kelley Blue Book website and use the calculator wizard. You will need to know the make and model of your vehicle, its mileage, and a relatively good idea of ​​the extent of damage to your vehicle.

Step 2: Apply a 10% limit to this value.. Even in the State Farm Claims case in Georgia, which introduced the 17c formula, there is no explanation why 10% of the initial cost determined by NADA or Kelley Blue Book is removed automatically, but this is the limit that insurance companies continue to apply.

So, multiply the value you got with the NADA or Kelley Blue Book calculator by 10. This sets the maximum amount the insurance company can pay out on a claim for your car.

Step 3: Apply the damage multiplier. This multiplier adjusts the amount you received in the last step according to your car's structural damage. In this case, interestingly, mechanical damage is not taken into account.

This is due to the need to replace or repair car parts; the insurance company only covers what cannot be fixed with a new part.

If you think this is confusing, it is and it does not compensate you for the lost sale value. Take the number you got in the second step and multiply it by the following number that best describes the damage to your car:

• 1: severe structural damage
• 0.75: severe structural and panel damage
• 0.50: moderate structural and panel damage
• 0.25: minor structural and panel damage
• 0.00: no structural damage or replaced

Step 4: Subtract More Cost for Your Vehicle's Mileage. While it makes sense that a car with more miles is worth less than the same car with fewer miles, the 17c formula already counts mileage at the seed as determined by NADA or the Kelly Blue Book. Unfortunately, insurance companies deduct the cost for this twice, and that cost is $0 if your car has over 100,000 miles on the odometer.

Multiply the number you got in the third step by the corresponding number from the list below to get the final reduced value of your car using formula 17c:

• 1.0: 0–19,999 miles
• 0.80: 20,000–39,999 miles
• 0.60: 40,000–59,999 miles
• 0.40: 60,000–79,999 miles
• 0.20: 80,000–99.999 miles
• 0.00: 100,000+

Method 2 of 2: Calculate the actual reduced cost

Step 1: Calculate the value of your car before it was damaged. Again, use the calculator on the NADA website or Kelley Blue Book to estimate the value of your car before it was damaged.

Step 2: Calculate the value of your car after it has been damaged. Some law firms multiply the Blue Book value by 33 and subtract that amount to find the estimated post-accident value.

Compare this value with similar cars with accident histories to find the true value of your car. Let's say in this case, similar cars on the market cost between $8,000 and $10,000. You may want to increase the estimated value after the accident to $9,000.

Step 3: Subtract the value of your car after the accident from the value of your car before the accident.. This will give you a good estimate of the actual reduced value of your vehicle.

If the reduced values ​​determined by both methods are very different, you can contact the insurance company responsible for compensating you for the loss in value of your car as a result of the accident. Be aware, however, that this will likely slow down your insurance claim and you may even need to hire a lawyer to be successful. Ultimately, you must decide if the extra time and hassle is worth it and make a decision accordingly.