Categories of accelerated depreciation

The market value of a damaged vehicle after it is repaired, is commonly valued by one of the categories of accelerated depreciation.

Categories

When a motor vehicle is damaged in a crash and then repaired, the value of the vehicle has diminished because it cannot be brought back to its pre-crash condition. Claims for accelerated depreciation fall under the following categories.

Category of accelerated depreciation Theory
Inherent or perceptual
Note: Commonly used accelerated depreciation.
A future buyer of the vehicle involved in a crash is likely to perceive the vehicle as
  • damaged goods, and have a negative perception of the vehicle, and
  • a reduced resale value because it was in a crash, and is no longer the same vehicle it was before the crash, even if it was properly repaired.

Rationale for using inherent or perceptual accelerated depreciation: When a vehicle has been in a crash, it is maintained that the crash history has the effect of lowering that vehicle's fair market value. For the consumer who is faced with two identical vehicles for sale; except, one vehicle is crash free and the other is not, an informed consumer is likely to select the crash free vehicle; unless, the price of the latter is sufficiently discounted to accommodate the sale.

Note: This theory is often supported by automobile dealers who discount a vehicle’s trade-in value.
Repair-related
When repairs are less than optimal, the amount of the resale value of a vehicle could be reduced as a result of
  • substandard and/or poor repairs
  • use of substandard parts, or
  • not following accepted or original equipment manufacturer (OEM) repair procedures.
When a vehicle has sustained damages and been repaired, one must consider the extent of those repairs. Some of these factors include the
  • age of the vehicle
  • location of the damages
  • nature, type and severity of the damages sustained
  • quality of the repairs, and/or
  • prestige or unique nature of the vehicle.
Part-related

When a customer chooses to replace "name brand" parts on the vehicle with generic parts.

Example: Replacement of a BMW windshield with a generic one would mean the BMW no longer exhibits BMW glass products, which arguably exhibits less market value.

Additional information

Different cases in the Provincial Court of British Columbia have used accelerated depreciation in their arguements, such as

Section topics

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Principle
Policy on accelerated depreciation
A claims representative must identify and control all accelerated depreciation demands, and immediately notify the Centralized Accelerated Depreciation Team when a customer indicates a concern that their vehicle value may have decreased due to a crash.
Parent topic: Depreciation