When a vehicle has sustained damage in an accident, the vehicle’s market price inevitably drops.

This fact is true even if the car is repaired impeccably. The theory is that the resale value of the car is reduced due to the collision. The question becomes one of how to calculate a diminished value claim. Insurance companies tend to use the 17c formula.

This article explains how insurance companies use this formula and gives you the tools to do the calculation at home if you wish.

About the 17c Formula

The concept of diminished value has a rich history in the court system, and the most relevant authority was a Georgia claims case settled by the state’s Supreme Court. That case set the stage for a formula that made calculating diminished value by an insurance company as fair and objective as possible.

Benefits of the 17c Formula for a Diminished Value Calculation

Having a formula that compensates consumers for diminished value claims reflecting a vehicle’s loss in value can help you recover the value of your car after a car accident, so this formula is a big win for the average consumer.

Here’s a brief glimpse into how it works:

Let’s say that you have a 2019 Honda Civic that was in an accident and sustained major damage. You took it to a body shop, and after a physical inspection, the car looks perfect.

Unfortunately, the incident remains on the car’s accident history, and it reduces the vehicle’s worth. When you try to sell your vehicle or trade it in, you’ll find that the car’s diminished value can cost you thousands of dollars.

Insurance companies can give the vehicle owner a way to recoup this diminished value by filing a claim against the at-fault driver.

Potential Flaws with the 17c Formula

Though it has become an insurance company industry standard, the 17c formula is far from perfect. Individual claims adjusters can adapt the formula based on individual factors and circumstances. As a consumer, knowing how the formula works can also give you a boost in bargaining power because you can argue about specific formula inputs 

Some of the most common complaints about the 17c formula are:

1. The baseline starting point for the calculation is only 10%. What this means is that the formula starts with an assumption of a 10% reduction in value and makes adjustments for other factors. Unfortunately, 10% is a gross underestimation of the loss in value. On average, a car can lose 40% of its market value after severe structural damage.
2. Geographic location is not part of the equation. The United States is a big country, and even within a state, there are different markets, economies, and costs of living. By not accounting for the geographic location of the damaged vehicle, the formula may not accurately reflect the total reduction in value.
3. The make and model of the vehicle are not included. Even moderate damage can have a drastic effect on the Kelley Blue Book value of a luxury car at a greater extent than a mid-level sedan. By failing to consider the type of vehicle, the formula may fall short.
4. The mileage adjustments may be weighed too heavily. While the formula lacks vital inputs, it may also put too much significance on the mileage factor. Though a vehicle’s mileage is a determining value for Kelly Blue Book and other appraisal databases, it should not be weighed too heavily, especially when other vital considerations are missing.
5. The damage multiplier is insufficient. The damage multiplier institutes a diminished value step formula that categorizes different types of damage and weighs them against a vehicle’s milage using the mileage multiplier. The formula setup is often criticized as being too arbitrary to accurately calculate diminished value and the resulting drop in sales value.

How to Overcome Formula 17c’s Shortcomings

There’s no question that this formula can provide a valuable starting point for negotiations with an insurance company. The problem arises when the formula’s output is taken at face value without looking at other factors that can heavily influence market value.

To avoid missing out on the true value of a diminished value claim, we recommend the following:

–   Do your own calculations. You can use the 17c formula or create your own based on adjustments that fit your situation (or use the Diminifaq service to help!)

–   Leverage the Diminifaq Tools to find out the value your vehicle based on the circumstances. We look at the vehicle history and make determinations for the value of your car based on the structural damage we see through photos uploads. Our skilled assessors and negotiators can get the best settlement for you based on the proper and accurate vehicle value we calculate.

The Bottom Line

Despite criticism that Formula 17c is a generic formula with a questionable mileage multiplier, it can still provide you with a useful starting point in calculating final diminished value claims. To get the maximum amount for your diminished value claim, make sure to run through the numbers yourself or contact Diminifaq for assistance.