Diminished Value: The Impact on Exotic Cars
Last edit: February 22 2024 • 219 view
What’s up, Autohackers! This is Andrew ‘Autohacker’ Ivanov here, and today we talk about salvage exotics. I often see exotics selling at salvage auto auctions for merely 50% of their value, even with very minor damages. Most people lack understanding regarding the reasons these vehicles are salvaged in the first place. And thus, do not trust to buy them, thinking there is a hidden damage somewhere. In this blog, I hope to reveal the “secret” about salvage exotics and why it is a great value to buy them.
Diminished value
To comprehend why exotic cars are salvaged so readily, one must grasp the concept of diminished value. This term often causes confusion and uncertainty, particularly in the context of exotic car ownership. While many enthusiasts appreciate the allure and prestige of exotic vehicles, few comprehend the significant impact that diminished value can have on these luxury cars.
The practice of marking cars with minor damages as ‘salvage’ and selling them for significantly less than their worth is truly confusing. This happens even with exotic cars and surprises many car lovers. Why should a car with little damage be sold for half price? Yet, this often happens at car auctions.
The heart of the issue lies in the concept of diminished value. Unlike traditional vehicles, where repairs can restore the car to its pre-accident condition, exotics are subject to a different set of rules. Merely being involved in an accident can significantly reduce the resale value of an exotic car.
This phenomenon spreads the entire market for exotic cars. Potential buyers often check the vehicle’s history and are hesitant to invest in a car that has been in an accident or had prior repairs, fearing hidden damages or compromised structural integrity. As a result, the demand for exotics with accidents in CarFax diminishes their value.
Diminished example
An illuminating example of the impact of diminished value comes from an insurance agent’s account of a Porsche owner. Following a single accident, the value of the Porsche plummeted, prompting the owner to seek compensation for the diminished value of the car. Remarkably, the owner received an additional $45,000, highlighting the significant financial repercussions of diminished value on exotic cars.
Taken from Facebook group
“$45,000 diminished value recovery. This is the largest loss of value recovery that I know of. It’s an all time record me, for NC and probably one of the biggest recoveries in the U.S. My good friend Cameron McCutcheon works for Hood Hargate insurance referred his client to me. He and his entire firm go above and beyond to help their clients. A customer of theirs was driving his recently purchased 2022 Porsche 911 Carrera GTS turbo Cabriolet with only 3,715 miles when he was hit by a driver insured with Progressive.
They paid $78,455 to repair his car at a Porsche certified collision center in Hickory NC. When repairs were completed Cameron said ” do your thing chicken wing!”, and submitted my comprehensive report showing the loss of value of this topless beauty to the appraiser hired by Progressive. After just one email he agreed with me that based on the fact this car now has a permanent wreck history the vehicle had lost $45,000 of its retail value. Did your insurance agent tell you about diminished value?
Progressive had to pay the shop $78,455 for repairs, and they had to pay the Porshce owner an additional $45,000.
As always my flat fee on a vehicle valued between $100k-$200k is only $1200. So he pocketed $43,800. Make sure you ask about diminished value and be sure to do business with an insurance agent”
Is not it just WOW?!
2017 Aston Martin with diminished value
I’ve owned a few salvage exotics myself and I took advantage of their diminished value. One of my favorites was an Aston Martin DB11. It had very minor damage to the front, as you can see in the photo below. But it was still salvaged, because the owner knew about the diminished value of his car and didn’t want to own a vehicle with an accident history.
He hired an insurance agent and was able to receive the full amount back for the car, while the insurance company had to salvage it. I inspected it prior to purchasing at the auction. I did confirm that it had minor damage with the transmission and engine okay, and went ahead to purchase it. The total repairs were not even 10% of the car’s value. This is the best example of taking advantage of diminished value. And did I mention the best part that I got this car for 50% of its value?!
Conclusion
In conclusion, diminished value poses a unique opportunity for buyers, because it allows them to get exotics with very minor damage for amazing 50% discount. If you are looking for exotic car I highly recommend you go over my short course, which teaches you how to navigate the world of Salvage Auto Auctions. Join my Facebook community, and you’ll find the course attached to a post there. It’s available in Spanish too!
