Does an Accident Lower Car Value?

Posted on June 14, 2024 by Active Insurance

One crucial factor influencing the transaction when buying or selling a car is the car’s history. A vehicle’s past can significantly impact its current and future value. Accidents, in particular, are events that potential buyers and sellers closely scrutinize. But how exactly does an accident affect car value? 

 

This blog explores the various dimensions of this question, including the financial impact of accidents.

Does an Accident Lower Car Value?

The simple answer is yes; an accident typically lowers a car’s value. The extent of this depreciation depends on several factors, including the severity of the damage, the quality of repairs, and the car’s age and make. When a vehicle is involved in an accident, its history is usually documented through services like Carfax, which potential buyers often check. A car with an accident history is perceived as a higher risk for future problems, making it less desirable than a similar vehicle without such a history.

 

Beyond perception, there’s also the practical aspect of potential underlying issues that might not have been fully resolved during repairs. Even high-quality repairs might not return a car to its original condition. This lingering doubt leads to lower buyer offers and reduced trade-in values from dealerships.

How Much Value Does a Car Lose After Being in an Accident?

The loss in value, often referred to as “diminished value,” can vary significantly. On average, a car can lose 10% to 25% of its market value after an accident. For luxury cars, this percentage can be even higher. Several factors influence this depreciation:

 

  1. Severity of the Accident: Major accidents resulting in structural damage or airbag deployment typically lead to greater value loss than minor fender-benders.
  2. Age and Mileage: Newer cars with low mileage suffer more in percentage value loss than older, high-mileage vehicles.
  3. Extent and Quality of Repairs: Cars repaired with original parts by certified technicians retain more value than those with subpar repair work.

 

For example, if a car was worth $20,000 before an accident and lost 20% of its value due to the accident, its new market value would be $16,000.

How Much Does Car Insurance Go Up After an Accident?

An accident can significantly impact your car insurance premiums. The increase in premiums depends on factors such as the severity of the accident, who was at fault, and your overall driving record. On average, drivers can expect their insurance premiums to rise by 20% to 50% after an accident.

 

For instance, if your annual premium was $1,200, a 30% increase would raise it to $1,560. Some insurance companies offer accident forgiveness programs, which we will discuss shortly, that can mitigate this increase for the first accident.

Does Illinois Have Accident Forgiveness?

Yes, Illinois offers accident forgiveness programs, but these are not mandated by state law and are provided at the discretion of individual insurance companies. Accident forgiveness programs are designed to prevent your premiums from increasing after your first at-fault accident. Eligibility for such programs often depends on having a clean driving record for a certain number of years and may require an additional fee.

 

These programs can be a valuable feature for drivers in Illinois, as they provide financial protection and peace of mind in the event of an accident. However, it’s essential to read the fine print, as the terms and conditions can vary widely between insurers.

Affordable Coverage with Active Insurance

While an accident can impact both the value of your car and your insurance premiums, there are steps you can take to manage these effects. Contact us at Active Insurance today to learn how they can help protect your vehicle and give you peace of mind.