How the Value of Your Car Is Determined

To ascertain whether it’s cheaper to repair your car or replace it after an accident, your car insurance company must determine its actual cash value (ACV). If the repair estimate is higher than the ACV determined by the insurer, the company will issue you a check for the ACV of the vehicle so you may replace it. Essentially, the actual cash value of a car is the original price of the vehicle less depreciation. Your vehicle loses value over the years, and the ACV will indicate the car’s present-day worth. Read on to find out how insurance adjusters calculate the ACV of a car.

The Basis of Actual Cash Value

Comparison is the basis of how insurers determine the value of a car. In other words, the insurance adjuster will compare your car to similar vehicles to calculate its worth. The adjuster will consider factors like condition, rarity, mileage, ZIP code, and special equipment when comparing your vehicle to others of its kind. The data to which your car is compared typically come from local car dealerships, private-party sales, and recent sales of the same vehicle in your area. In most cases, the amount of your car’s ACV falls somewhere between its trade-in value and its full-retail value.

Computerized Systems for Determining Vehicle Values

With all of the data auto insurers consider in estimating the value of a car, it would be impossible to arrive at an accurate figure by hand, which is why insurers rely on computer programs for assistance. Car insurers frequently invest in third-party computer systems, such as CCC, that can automatically generate an ACV figure after the insurer inputs variables such as make, model, mileage, model year, location, etc. Such software programs rely on national databases that often borrow data from body shops, dealerships, and other insurers.

The Classic-Car Exception

Usually, the older your car is, the lower its actual cash value will be. The only exception is classic or historic vehicles. In determining the actual cash value of a car that is 20 years old or more, insurers use a different system. When insuring a car that is 20 or more years old with most carriers, you must purchase a “stated value policy,” or a policy that insures the vehicle for an amount you and your agent decide is appropriate. The amount of the stated value is then how much the insurer will pay you if the vehicle is totaled.