Diminution Valuations – all vehicles

Diminution Reports for Legal and Insurance

Diminution in value refers to the reduction in a vehicle’s market value following an accident, even after it has been expertly repaired. This concept is particularly significant for prestige cars and supercars due to their high initial value and the expectations for perfection associated with luxury brands.

For prestige cars, even minor damage can lead to diminution. Potential buyers are often less willing to purchase a high-value vehicle known to have been involved in an accident, fearing hidden defects or future reliability issues. As a result, such vehicles can suffer from a reduced resale value compared to similar models with no accident history.

Several aspects contribute to this. Firstly, the perceived reliability of a repaired vehicle is often lower, regardless of the repair quality. Buyers worry about the potential for future problems. Secondly, the market for luxury vehicles places a premium on pristine condition and flawless history. Any indication of past damage can have a significant impact on the vehicle’s desirability and status.

The emotional and psychological attachment to a prestige car may also play a role. Owners and buyers of luxury vehicles expect them to be in perfect condition, reflecting their high standards and investment. Any deviation from this expectation can significantly impact the perceived value.

In financial terms, the diminution for a prestige car can be substantial. However, it is not always as high as some owners imagine or would ideally like to claim for. A figure of 30% is often mentioned but the reality is usually lower. Factors such as mileage, provenance, specification and condition, supply of RHD examples and limited editions and the heat of the market around a vehicle when it is damaged can play a key role in diminution.

Diminution in value is a critical consideration for prestige car owners and buyers following an accident and should be considered as a legitimate claim. We offer diminution reports meeting court standards starting at £720 and have supplied these reports to solicitors and insurers across the UK. Contact us for details of our reports and our process.

We are quite often approached to write reports meeting a ‘target’ figure. Note that we do not write such reports. To meet court guidelines around independence, the report will use market information and our decades of experience to estimate a potential diminution percentage. The opinion will be independent and not that of the client.

The Consumer Psychology behind Diminution

The consumer psychology behind diminution on high-value prestige cars and supercars may be driven by several key factors, uncluding:

• Perceived Reliability: Regardless of the quality of repairs, consumers often perceive repaired vehicles as less reliable than those that have never been damaged. There’s a concern about potential hidden defects that might not have been fully rectified or could emerge later.

• Resale Value Concerns: Potential buyers are wary of the future resale value of a vehicle that has been involved in an accident. The history of significant repairs can make it difficult to sell the car later, as prospective buyers prefer vehicles with a clean history.

• Status and Prestige: Owners of luxury vehicles often value the prestige and status that come with their car. Any history of accident damage diminishes this status, affecting the psychological satisfaction the owner derives from the car.

• Fear of Incomplete Restoration: There is often a fear that the vehicle hasn’t been restored to its original condition, affecting both performance and aesthetics. The shallow depth of factory original paint can not be replicated outside the factory. For high-end cars, where even minor discrepancies can be a deal-breaker, this can be significant.

• Risk Aversion: High-end consumers tend to be more risk-averse when investing large sums in assets like luxury cars. The knowledge of past damage, regardless of repair, introduces a risk factor that many are unwilling to accept.

• Emotional Attachment: Owners often form an emotional attachment to their vehicles. Any damage can alter the original state of the car, which can psychologically impact the owner’s attachment and satisfaction with the vehicle.

Understanding these psychological factors is crucial for valuers considering the issue of prestige car and supercar diminution, as all play a part in determining the likely end percentage. However, there are forces working against diminution and keeping the percentage of loss lower than some might desire, including aspirational value, the supportive effect of higher prices for lesser models (911 Carrera vs GT3, for example) and, as ever, supply and demand.