Two weeks ago, my wife’s mint condition 12-year-old car was t-boned by a Boy Scout (replete with uniform, hat and kerchief) in a mall parking lot. True to his oath of ethics, he was insured and accepted full accountability for causing the accident. Most importantly, no one was physically injured. All of which makes this a curiously simple case study of insured auto loss – until we consider the impact of used vehicle history reporting upon used car value.
Let's say you're in the market for a used car and you find one of interest. For about 25 bucks you can buy a branded service and accident history report generated via the car's VIN. You discover that the car was involved in a collision. The report might indicate repair of front, rear or side impact collision damage. The car looks good, you have it checked by a mechanic and as an astute buyer you show the seller the history report, then offer 20-25% below resale book value – likely a good deal, for you. You might also, like many prospective buyers, not even consider buying the car.
If you're the seller – in this case, possibly my wife – you've been a completely innocent victim of a negligent driver whose insurance carrier paid to repair your car. Yet your extremely well maintained vehicle is now worth a significantly less, if any, amount. My lawyer friends tell me that in the real estate market, which requires full disclosure under penalty of perjury, this is known as "stigma damages." Such as when land contaminated from an oil spill that no one would ever purchase (despite remediation) and for which there is a case history of remunerative damages paid by the perpetrator of such incidences. But it’s not so with auto damage.
In our auto case, we experienced an amazingly honest transaction with an Allstate Insurance adjuster (please excuse the shameless plug, and in full disclosure, we have no other association with Allstate) who called the repair vs. market value a draw. But it wasn't a draw, because if we opted to have the car repaired, it would never have sold for the market book value paid under "total loss" – which, by the way, included a premium value added for the car's condition prior to the collision.
Since this experience also precipitated our launch of a used vehicle search, I've learned another important fact: many used car dealers sell late model used cars that were previously owned by car rental companies that self-insure their fleet. Many rental car companies also own their own service and collision repair facilities and are often times able to slip under the radar of vehicle history reporting agencies.
So while today's ubiquitous IT advancements provide increased transparency on so many levels, we can still state with confidence: "Buyer Beware." And as much as I personally detest corporate lobbying and its dilution effect upon democratic principles, I also suspect that auto leasing companies with their pedantic turn-in and residual value standards may well facilitate auto stigma damage remuneration to our collective benefit before long – but maybe just theirs.