The Actual Present Value (ACV) of a car is what it’s worth today. This value includes the depreciation of your vehicle. It also shows how much the insurance company pays out when they write off a car.
If you disagree with the insurer’s rating, you may be able to negotiate a higher payout. However, you need to have the evidence to back it up.
What is the real cash value of a car?
The real cash value of your car is what it is worth in its current condition, or the amount you could reasonably expect if you were to sell it today. This includes an impairment loss for depreciation. And because cars depreciate as soon as you drive them out of the parking lot, your vehicle’s ACV will be lower than what you paid for it, even if it’s not that old.
If the damage to your vehicle exceeds a certain percentage of the ACV, the insurer will declare it as a total loss. They reimburse you for the actual cash value of the car (minus your deductible). The threshold for “totaling” a vehicle varies by state and insurer.
What is the actual cash value compared to the replacement cost of a vehicle?
When determining the value of a car, the actual cash value takes that into account Depreciation of the vehicle. Depreciation represents the loss in value since the car was purchased and is determined based on several factors such as mileage, wear and tear and accident history. The year, make, and model also affect a car’s depreciation, as some vehicles hold up in value better than others.
The replacement cost is the amount you have to pay to buy a new version of the same or a similar vehicle. It is higher than the ACV.
Because cars are depreciating so quickly, a car loan or lease can easily turn them upside down, especially if you are investing little or no money. Have GAP Insurance coverage can help reduce this risk. It helps pay the difference between the value of your car and what you owe the lender or leasing company. Many GAP policies even cover your collision or fully comprehensive insurance. And with GAP coverage, you don’t have to worry about whether your vehicle’s ACV is high enough to pay off your loan or lease.
How do insurance companies determine the ACV of a write-off car?
According to Josh Damico, vice president of Insurance Operations at Jerry, an auto insurance comparison service, some insurers have proprietary models in-house, but most use a third-party provider. “Most freight forwarders are connected to a third party provider that they feed the data into. The data on the vehicle and any damage is loaded into the third-party system, ”he said. The software then aggregates the information to calculate the actual cash value of the vehicle.
The ACV depends on several factors including the year, make, model, vehicle options, mileage, wear and tear, and accident history. If you disagree with the insurance company’s appreciation of your vehicle, you may be able to negotiate a higher payout with them. Before doing this, however, there is some evidence that you should collect to improve your chances of success.
You can refer to Kelley Blue Book or other sites and use KBB’s Auto depreciation tool review the insurer’s rating. It is important to provide as much detail as possible about your specific car to ensure you get the most accurate estimate.
Tips for Negotiating Your Car’s Real Present Value
“A good first step is to speak to the appraiser who came out and looked at the vehicle,” says Damico. Discuss all of your vehicle’s options to make sure the appraiser understands everything that is in your car. Make sure there are upgrades or after-market products included.
“If you have evidence of other cars that have been sold in your area and you’ve done your own research, you can take it to the appraiser and have a conversation,” said Damico. However, your own research can only get you so far. If you cannot agree to the reviewer, you can hire a private reviewer. But you have to pay for it out of pocket, which Damico says is usually anywhere from $ 200 to $ 300.
“Before doing that, it is always good to check out a website like Kelley Blue Book to get an idea if the referee is [offering] seems fair or whether [their valuation] is far enough away to take responsibility for hiring an appraiser, ”he said.
If the appraiser comes back with a higher ACV than the insurance company, you have more room to negotiate. However, if the estimates are comparable, you may have to accept the insurance company’s offer.