You slow down for a red light and the moron behind you is texting. He doesn't stop in time and hits you from behind, not hard, but just enough to damage your bumper. You make a claim with your insurance and pay your deductible. Then you go to trade your car and find out that the accident has cost you in the way of resale value.
Opponaut and car dealer Steve Khun wrote a great post on how the CarFax (or any vehicle history report) works. While they are not perfect and don't reveal every accident or problem a car has had, what does show up can mean less money in your pocket even if the accident wasn't your fault.
Damaged Cars Are Worth Less
I realize that is an obvious statement, but too often folks forget that their car was damaged years ago and despite the fact that "it looks brand new" today, that recorded history is going to impact their resale value. For example, let's say you found two cars of the same year, make, model, equipment and have similar miles, but one has damage reported on the Carfax while the other does not. You would expect to pay less for the one with the damage and because buyers expect to pay less for that car. Dealers will offer anywhere from 10-30 percent less for your trade. If the trade value on your car was $20,000 with no damage, don't be surprised if you are only offered $18,000.
But It Was Only Cosmetic
While major structural or mechanical damage is going to more dramatically reduce the value of the car, most buyers aren't going to care if it was "just bumper" or "a body panel and some paint." People are hesitant to purchase cars that were in an accident because you never know what kind of secondary problems may pop up down the road. A collision on the rear may have only required a new panel now, but may have alignment issues later. Of course it may be totally fine, but this is how buyers think and this is why these cars are harder to sell.
Should I Even Bother Processing The Claim?
Well...that depends on several factors. If the collision involved a police report it may show up regardless of whether or not you get the damage repaired through insurance. If there was no police report involved it really depends on how expensive is the repair and what is your deductible, and how long you plan on keeping the car.
Most collision shops will give a free estimate and, as Steve mentioned in his post, many of them will not report damage if the customer is paying out of pocket. If the damage is $5,000 or more even with a $500 deductible out of pocket, it is probably worth having the insurance cover it. Now if the damage is only $1500 and you have a $500 deductible, and you plan on trading the car when it is 5 years old or less, you will most likely take at least a $1000 hit on your trade value. So you can either pay that thousand dollars out of pocket now, or lose it later. Of course if you plan on keeping the car for along time the damage may not have a huge impact.
Damaged Cars Could Mean Great Deals
We have mentioned numerous times on Car Buying that you get any used vehicle inspected by an independent mechanic. Don't take the dealer's word that the car was put through a 128 point inspection and is "Certified." A good inspection will cost you around $100, but could save you thousands. It should reveal trouble spots and can also tell you whether or not that minor cosmetic damage is just that.
If you find a car with what seems to be a mark on the CarFax and little else, this could be an opportunity to get a great ride for much less than one without the baggage.
If you have a question, a tip, or something you would like to to share about car-buying, drop me a line at AutomatchConsulting@gmail.com and be sure to include your Kinja handle.