The Total Loss Survival Guide How To Calculate The Value Of Your Vehicle After A Total Loss

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1 The Total Loss Survival Guide How To Calculate The Value Of Your Vehicle After A Total Loss TheyWroteOffMyCar.com., 2014

2 Table of Contents 1. Introduction What is a total loss? What is "Replace Cost"? What is Actual Cash Value (ACV)? What is Market of Loss? What is Market Factor? What is Condition Factor? What is Typical Dealer Discount? What is Take Price? How much is my car really worth? Getting more for your vehicle Replacing your vehicle Frequently Asked Questions About TheyWroteOffMyCar.com...11 The Total Loss Survival Guide, 6 TheyWroteOffMyCar.com,

3 1. Introduction The reason you are holding this guide is because your vehicle has just been deemed a total loss by your insurance company. Whether this is the result of an accident or theft, we understand how challenging this time can be for you especially when you add the inconvenience of not having your vehicle anymore. This guide has been created by TheyWroteOffMyCar.com, an independent helpline specializing in total loss claims. TheyWroteOffMyCar.com assists policyholders dealing with the many challenges of a total loss. Nobody plans for an accident or a theft to happen. And this is probably the first time such a thing has ever happened to you. This guide was written specifically for people in your situation, to help you understand what steps your insurance company should have taken to calculate the value of your vehicle. Please Note: The onus is on you, not the insurance company, to ensure that the market value the insurance company has arrived at is fair. 2. What is a total loss? Your insurance company will deem your vehicle a total loss if: a. It is involved in an accident and the cost to repair it is close to or exceeds the market value of the vehicle, or b. It is stolen and not recovered within a reasonable period of time. After an accident, your insurance company will send an appraiser to look at the condition of your vehicle and determine the cost to repair it. The term appraiser is actually a misnomer. Most auto appraisers are actually damage appraisers, not vehicle value appraisers, although some may have experience in valuing vehicles as well. The Total Loss Survival Guide, 6 TheyWroteOffMyCar.com,

4 A comparison will be made between the market value of the vehicle and the cost to repair. If the repair costs are too high, then the insurance company will give you a cash settlement value to write off the vehicle. In effect, they are buying whatever is left of the vehicle from you at a price that you could reasonably expect if the total loss did not take place. To receive the settlement payment, you will be required to sign a Proof of Loss and submit it with the ownership to the insurance company. At this point, the claim is settled (i.e. finished). If the vehicle was stolen, the appraiser will gather all pertinent information and documentation from you regarding the vehicle, its options, mileage and condition. Some of the documentation may include the bill of sale, any receipts for major items added and maintenance records. The insurance company may wait for a reasonable period of time to give the police a chance to recover the vehicle. During that time, the market value of the vehicle will be determined and, if the vehicle is not recovered, you will be given the cash settlement value to write off the vehicle. Once the claim is settled, if the vehicle is recovered, then it belongs to the insurance company. 3. What is "Replacement Cost"? Depending on your insurance company and the jurisdiction where you live, there may be replacement type coverage which will provide you with the cost to replace the vehicle. In some jurisdictions, it is not actually replacement coverage so you should be careful to understand your policy. For example, some jurisdictions have a Waiver of Depreciation which provides you with the lower of what you paid, the original MSRP and today's cost of replacing your vehicle on a cash basis, regardless of whether you financed or leased it. The reason settlement is done based on a cash basis is that if the insurance company was in a position to buy the vehicle and simply give it to you, they would simply buy it at the cash price, including all cash incentives, and put it in your driveway. However, many people have financed or leased vehicles, thus not taking advantage of the cash incentives. These decisions are motivated by their monthly obligations. Unfortunately, the insurance policy covers the vehicle and not the terms under which one pays for the vehicle. Hence, insurance companies only pay out based on the cash price. The Total Loss Survival Guide, 6 TheyWroteOffMyCar.com,

5 4. What is Actual Cash Value (ACV)? The actual cash value is the amount your insurance company claims your vehicle was worth just prior to the loss. As no two used vehicles are identical, they will try to determine the value of your vehicle by comparing it to other similar vehicles being advertised for sale. If done properly, the resulting figure should represent a fair and reasonable current market value for your vehicle. The word worth is very intangible. A vehicle may be worth more to you than it is on the open market. Also, certain types of vehicles are worth more in different geographic areas. For example, a 4x4 pickup may be worth more to someone in the country than to someone living downtown. A more tangible and accurate way to define ACV is the value that the average buyer, with full knowledge of all facts that are pertinent to making a buying decision, would reasonably pay for this specific vehicle just prior to the loss, if it was available for sale. To arrive at their value, the items 4 through 8 below should have been considered in the insurance company s calculations. Please Note: It is your responsibility to ensure that the value arrived at by your insurance company meets the requirements of this definition and incorporates all the following items. Call our helpline if you are not sure or you want a second opinion. 5. What is Market of Loss? Market of Loss is the town or city where you reside. If local dealers do not have enough of such inventory available for comparison it will be necessary to expand the search area till enough suitable vehicles are found. Dealers from other markets may advertise in your market, which then influences the local selling price. 6. What is Market Factor? Vehicle prices may differ from one market to another depending on the competitiveness of those markets. The larger the market, typically the more competitive it will be. A market factor should be added if a vehicle from a more competitive The Total Loss Survival Guide, 6 TheyWroteOffMyCar.com,

6 market is being used as a comparison. Similarly, it should be deducted if a vehicle from a less competitive market is being used as a comparison. 7. What is Condition Factor? A condition factor is a reflection of excessive wear and tear due to very large differences in mileage, overall condition and regularity of maintenance. If you are able to demonstrate that you have taken exceptionally good care of your vehicle or the vehicle has considerably lower mileage than most advertised vehicles, a condition factor should be added thus increasing the value of your vehicle. Alternatively, a condition factor should be deducted if your vehicle had exceptionally high mileage or appeared in rough shape relative to a typical vehicle. 8. What is Typical Dealer Discount? There is often room to negotiate on a vehicle s asking price. It is reasonable for an insurance company to deduct an amount that a dealer would typically discount such a vehicle in order to close the sale. Although there may be situations where a comparison vehicle is already priced aggressively with little further room to negotiate, this discount would represent the typical discount on a vehicle of this nature. Please note that if an insurance company takes such a deduction, they should be prepared to back it up with evidence or guarantee on the replacement. 9. What is Take Price? The take price is a reasonable estimate of what a dealer would take for the vehicle (asking price minus discount). 10. How much is my car really worth? If you are like most people, you skipped to this section first and we don t blame you. Just be sure to look over the other sections of this document to make sure you haven t missed anything. When trying to establish a fair and reasonable market value, the insurance company cannot selectively choose a few vehicles to compare against. This would be an unfair practice as it would skew the final value to their benefit. An insurance company The Total Loss Survival Guide, 6 TheyWroteOffMyCar.com,

7 has a higher obligation to policyholders than to simply settle based on a lower price. An insurer should take a comprehensive look at the market in its entirety and consider the complete range of similar vehicles being advertised. Pricing in the retail automotive market is very inconsistent and based on whatever the market will bear. In the used car market, there are no two identical vehicles. Some have different options, some have different mileage. Therefore, trying to compare your vehicle directly with those currently being advertised is like comparing apples and oranges. The first thing that should be done is to adjust the price of each comparison vehicle by increasing or decreasing the asking price based on differences in mileage, options and condition against yours. Then you are comparing apples to apples. Now add a market factor and condition factor if applicable and allow for a typical dealer discount. The result is a range of adjusted take prices. This is the range of what your vehicle would be selling for on the market today and your actual vehicle would sell somewhere in that range. Most vehicles will typically sell at the median range of these adjusted take prices and that is the value your insurance company should deem as the market value. The median price should not simply be an average price, it should be the price where you could replace your vehicle with at least half of the adjusted values in the entire range. If warranted due to extremely good condition or excessively low mileage, it may sell closer to the high end of the range. Alternatively, a vehicle in poor condition or with excessively high mileage may warrant a value closer to the low. 11. Getting more for your vehicle If you feel the value of your vehicle is higher than the settlement offered by your insurance company, most jurisdictions have a dispute resolution process called the 'appraisal process'. When presented with their settlement value, if you do not agree, you must notify them that you would like to invoke the appraisal process. You will then be responsible for hiring your own appraiser to come up with an independent valuation. You would present their valuation to the insurance company. If they accept the other value, great. If not, then both appraisers may need to communicate to see if they can a single agreement. If not, then a neutral umpire would be hired that is acceptable to both you and the insurance company. That umpire will review both sets of data and determine which they feel is most accurate. The Total Loss Survival Guide, 6 TheyWroteOffMyCar.com,

8 Presenting the correct data to the insurance company is very important if you are seeking more money. If your research only presents the highest advertised vehicle and you are claiming that this is what yours should be worth, you will not be taken seriously. Also, if you submit vehicles from distant markets just because they are priced higher while there are plenty in your own market that are not priced higher, then again you will not be taken seriously. Insurance companies are supposed to pay out a fair value, no more and no less. However, the tools and techniques they use may not always provide an accurate picture. Pricing of vehicles is very complicated and unless one is in the vehicle business, which they are not, it is very difficult to determine what a vehicle should be worth. In addition, they write off so many vehicles that they are not always able to take the necessary time to thoroughly study the vehicle or the market. This too may affect the value they come up with. Again, the onus is on you to prove the value should be higher. 12. Replacing your vehicle The purpose behind insurance is to put you, the policyholder, back into a similar position you were in just prior to the loss through cash compensation. It is then up to you to decide what to do about replacing your vehicle with the money you receive. The insurance company is not involved in any way with replacing the vehicle. The ACV should be the value of your vehicle. Any differences, positive or negative, between the original and a vehicle you choose to replace with is your responsibility. For example, if your vehicle did not have a sunroof but the one you choose to replace it with does, then you would be responsible for the cost of the sunroof. If yours had the sunroof and the replacement doesn t, then you would keep the value of the sunroof. Be cautious when trying to replace your vehicle. You are facing the pressures of a total loss, like losing the rental vehicle soon. This may cause you to make certain decisions in haste that you would not otherwise make. These decisions could be costly in the long run. The Total Loss Survival Guide, 6 TheyWroteOffMyCar.com,

9 The most important point to note here is to not make any buying commitment, do not sign any contract for the purchase or lease of another vehicle, until you know what you are getting. You may sign an agreement to purchase and find out that you are getting back a lot less than you originally thought. We do provide assistance to help you replace your vehicle with any vehicle you wish. Our affiliated car buying service, Automall Network, has a dealer s license and can provide you with significantly discounted prices but more importantly can ensure that the proper vehicle history checks and independent mechanical inspections are done to minimize any potential future problems. 13. Frequently Asked Questions Q: What about extended warranties, rustproofing, etc.? A: Extended warranties are like insurance policies against malfunction. Your auto insurance policy covers the cost of the vehicle, not the cost of other forms of insurance. However, in many cases, the warranty is a prepaid expense that is used up on a month-to-month basis. The unused portion of the extended warranty could be refundable. You will need to speak to the extended warranty company to obtain a refund. For rust, paint and fabric protection, you may have paid for these upfront when you bought the vehicle. Unfortunately, they don t typically add value to the resale price when you resell it. Q: I owe more money than what the insurance company is paying me. What can I do? A: Because depreciation reduces the value of your vehicle faster than your payments allow, you may end up owing more on the vehicle than what your vehicle is worth. This is called negative equity. The insurance company is required to pay out only what the original vehicle is worth. If the vehicle was financed, you still owe the difference. If the vehicle was leased, your lease agreement may have a clause dealing with this. As each situation is different, please call us directly for advice on dealing with negative equity issues. The Total Loss Survival Guide, 6 TheyWroteOffMyCar.com,

10 Q: What about costs of maintenance/repairs/upgrades that I have incurred? A: Maintenance: regular maintenance is something that is required on every vehicle. If you didn t maintain your vehicle, it will be worth less than comparable vehicles in the market. However, if you can provide supporting receipts to demonstrate that you have maintained your vehicle regularly according to manufacturer specifications, then that could increase the value. You will not recover the full cost of all the receipts provided, however it may add a small premium above and beyond the value of comparable advertised vehicles. Repairs: most repairs (eg: fixing a cracked windshield or broken tie rod end) put the vehicle into an operable or roadworthy condition similar to most vehicles being advertised. Comparable vehicles advertised for sale, especially by dealerships, would not typically have such problems and therefore such repairs to your vehicle would not enhance its value above and beyond vehicles advertised for sale. Brakes replaced within the last 6 months on the other hand, would last longer than used brakes available on most advertised vehicles, and therefore a slight premium should be added if receipts were presented. Tires: new tires added within the last year would also add value on a depreciated basis. Receipts are required to substantiate the additional value. Cosmetic Upgrades: these types of upgrades are very personal in nature and will not necessarily add value to the vehicle on the open market. They may actually limit the audience interested in such a vehicle with these upgrades, therefore reducing the value. Each such item should be considered on a case-by-case basis. Q: I ve replaced my engine or transmission with a used one. Does that add any value? Unless it can be demonstrated that the used unit had very low mileage on it prior to the installation relative to vehicles in the market, it would not add value. It may have added value to the original vehicle compared to its original condition (that being inoperable), however it would not add value above and beyond the typical vehicles advertised. A new engine or transmission definitely would add value as it would extend the life of the vehicle. Receipts must be provided. The Total Loss Survival Guide, 6 TheyWroteOffMyCar.com,

11 14. About TheyWroteOffMyCar.com TheyWroteOffMyCar.com is a consumer advocate and helpline for people who have had a total loss. It's sister website, MyCarisWorthLess.com provides assistance to those whose vehicle has been repaired. TheyWroteOffMyCar's services include review of the insurance company's valuation report to ensure it is fair ($75). If we feel it should be higher, then we will run our own report using the best practices defined in this guide and provide you with the credible data you need to have the insurance company review their value and point out any mistakes they made in their calculations. We will also guide you in what to say and how to say it. Insurance companies will take you much more seriously if you provide a proper argument to defend your position and demonstrate the flaws in their research. If we feel that the value is already fair or generous, we will advise you and there will be no further charge. For questions, concerns or to get a second opinion on your insurance company s valuation, contact our Free Support Helpline at: Toll Free from anywhere in North America: (866) The Total Loss Survival Guide, 6 TheyWroteOffMyCar.com,

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