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Using NADA to Determine Value After a Car Accident



Being involved in a car accident can present many problems. One of the most common issues that may arise stems from damage done to a vehicle. When a car is damaged, the owner of the car is entitled to some monetary compensation for the loss. However, it can be hard to determine exactly the amount of money at which the car is valued. In the state of Alabama, insurance adjusters use the National Automobile Dealers’ Association (NADA) guide to make determinations on car valuations after car accidents.

© Nikita Kuzmenkov - Fotolia.comWhat is NADA?

NADA is a national organization that represents both international and domestic car and truck dealers. It helps dealers by following industry trends and representing dealerships before Congress. It helps consumers by providing information regarding pricing for both used and new cars and issuing reports regarding the industry.

How does an insurance company use NADA determine a car’s value?

Often, a car insurance company will use the NADA guide to determine a car’s value after it has been in an accident in an effort to determine if the car should be considered a total loss. In order to determine the value, the insurance company will take the retail value of the car, if it was in good condition, and make deductions based on the condition of the vehicle after the accident. Then the deductible and depreciation are taken into consideration and reduced from that value. Then they will use NADA’s mileage tables to add or subtract value based on the miles the car was driven in comparison to the average. There are also other elements that help to determine the total valuation of a vehicle after an accident.

Cash value of a vehicle

Although the term “cash value” seems straightforward, it’s not. Depreciation begins immediately; the cash value of a car ceases being the exact amount that the owner paid for it as soon as it leaves the lot of the dealership. The value of the car is also affected by the number of miles the car has been driven, general wear and tear on the vehicle, and the damage that was done to the car during the accident. All of these factors are considered when an insurance company determines the actual cash value of a vehicle. The actual cash value will also be less than the amount of the loan on the car.

Cash value vs. replacement cost

Since depreciation begins immediately, the cost of replacing the car will always be less than the than its cash value.

Fair market value

Another factor that goes into determining a car’s value after it has been in an accident is the fair market value. The simple definition of the fair market value of an automobile is the amount of money an interested buyer would be willing to pay for the vehicle. However, when dealing with making an insurance claim, the overall definition becomes more complicated because the factors need to be considered. For example, if a car is severely damaged or totaled in a car accident, it is unlikely there are any interested buyers from whom to determine the fair market value.

Determining a wrecked car value

When a car has been in an accident, and it is difficult to determine a fair market value, it is still necessary to assess a value to the wrecked car. This valuation cannot be determined by the owner of the car, it must be done by an insurance adjuster. Factors the adjuster takes into consideration when determining this valuation include frequency of service, parts that were used, and intervals at which the car was serviced.

Insurance companies and NADA

Since there is a multitude of insurance companies throughout the country and each one deals with thousands of automobile claims, it is important for them to have a baseline from which to work. In the state of Alabama that baseline is provided through NADA guides. NADA compiles the necessary data regarding the values of automobiles and uses it to assign valuations to specific vehicles. Insurance companies have access to this data and the corresponding valuations and apply it to their customers’ insurance claims. By following the guidelines set forth by NADA, insurance companies know that they are assessing each claim fairly and by the same set of standards.

When a car has been involved in an accident, car owners rely on their insurance companies to help them defray the costs of fixing or replacing their cars. Car insurance companies in turn rely on NADA to guarantee each customer is treated fairly. By assessing data and applying valuations to vehicles, NADA helps to make sure every person who makes an automobile claim through their insurance company is treated fairly, equally, and with the same standards.

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