What is diminished value?

Diminished value is the loss in a vehicle’s market value caused by an accident, even after repairs are completed. Buyers often pay less for a car with an accident history. Diminished value is a separate element of property damage you can try to recover from the at-fault party or from your own insurer (depending on your policy and the facts).

Types of diminished value claims

• Inherent diminished value: The most common form — the vehicle is worth less simply because it has an accident history.
• Immediate diminished value: The drop in value right after the crash and before repairs.
• Repair-related diminished value: Caused when repairs are incomplete, use inferior parts, or when the repairs themselves adversely affect market value.

Who can make a diminished value claim in New Mexico?

The vehicle owner (or a lienholder with an interest) is the usual claimant. You can pursue diminished value against the at-fault driver’s liability insurer. If you use your own collision coverage to pay for repairs, your insurer may pursue the at-fault insurer through subrogation — but you still retain a direct right to seek diminished value from the at-fault party’s insurer in many cases.

How to prepare a diminished value claim — step by step

1. Preserve evidence at the scene: Take photos of damage, the other vehicle, licenses, and the scene. Get witness names if available.
2. Notify insurers promptly: Report the accident to your insurer and the at-fault party’s insurer. Follow policy notice requirements.
3. Document pre-accident condition and value: Gather photos, maintenance records, and evidence of market value before the crash (Kelley Blue Book, NADA, local listings, or prior appraisals).
4. Get thorough repair documentation: Keep all repair estimates, invoices, parts lists, and the repair shop’s description of repairs.
5. Order a diminished value appraisal: Hire an independent appraiser experienced in diminished value opinions. The appraiser will estimate the car’s fair market value before and after the accident and compute the diminished-value amount.
6. Prepare a written demand: Include the appraisal, before-and-after market evidence, repair invoices, and a clear numeric demand for payment from the at-fault insurer.
7. Negotiate or escalate: Expect negotiation. If the insurer refuses to pay reasonably, consider filing a civil action, using arbitration/ appraisal procedures in your policy (if applicable), or filing a complaint with the state insurance regulator.

How insurers typically respond

Many insurers initially deny or downplay diminished value, offering little or no compensation. Some will accept a reasonable demand if the documentation convinces them the loss is real. If the at-fault insurer refuses, you can escalate with more documentation, demand arbitration (if the policy provides), or sue in civil court for property damage.

How diminished value is calculated (simple example)

Calculation steps:

• Establish pre-accident market value (use KBB, NADA, local comparable sales): $12,000
• Establish post-repair market value (through appraisal or market comps): $10,500
• Diminished value = $12,000 − $10,500 = $1,500

Appraisers use multiple data points (comps, repair quality, age, mileage, and vehicle history reports) to reach an opinion of value.

Practical tips and helpful hints

• Document everything immediately: photos, receipts, repair invoices, and any communication with insurers.
• Get an independent diminished-value appraisal rather than relying only on an insurer’s number.
• Keep a file of pre-accident evidence: maintenance records, recent cleanings, upgrades, and photos showing condition.
• Obtain a vehicle history report (e.g., CARFAX) to show how an accident affects marketability.
• Include used-car market comparables in your demand package. Local listings for similar cars are persuasive.
• If you used your own collision coverage, know that subrogation may affect your claim — your insurer may pursue the at-fault party while you still pursue diminished value directly.
• If the insurer offers arbitration or appraisal under the policy, read the contract carefully and consider whether that forum is likely to be fair for your case.
• Contact the New Mexico Office of Superintendent of Insurance for consumer help if you suspect an insurer acted unfairly: https://www.osi.state.nm.us/
• If the insurer won’t pay and the amount is modest, investigate small-claims or magistrate-court options in your county. For larger claims, consult a civil litigator experienced with property damage and insurance claims.

Timing and legal deadlines

Act promptly. You must comply with notice requirements in your auto policy and state procedural deadlines if you later sue. New Mexico statutes and court rules set the timing for filing claims and suits. For authoritative statute language and deadlines, consult the New Mexico Legislature’s statutes at https://www.nmlegis.gov/ or talk with a local attorney.

When to hire an attorney

Consider hiring a lawyer if:

• The insurer refuses to negotiate or denies a valid claim.
• The diminished-value amount is substantial compared with repair costs.
• Your case involves disputed fault, complex repairs, or multiple parties.
• You want help preparing a strong demand package or filing suit.