When is a vehicle a total loss?
A vehicle is considered a total loss when the amount of the repairs (including supplemental claims such as projected rental during the period of repair) equals or exceeds 75% of the pre-accident cash value of the vehicle which is sometimes referred to as the vehicle’s Fair Market Value (FMV). In other words, the FMV is the value a seller, if not forced to sell, and a buyer, if not forced to buy, would agree upon for the vehicle immediately before the collision giving rise to the loss.
Insurance adjusters generally have a book value they use to arrive at FMV. They may have some discretion based on the condition of the vehicle, but there is generally only a little room for negotiation. Book value is supposedly FMV and as such this gives both sides a little leeway to negotiate. Many insurance companies use the National Automobile Dealers Association (NADA) publication entitled “Office Used Car Guide” which is published monthly. Our office has a current copy which we refer to when we negotiate the value of our clients’ vehicles. Some liability companies have their own methods to arrive at valuations. They may consider their system to be superior to the NADA book value. Notwithstanding, no publication is entirely accurate and they should be, and are indeed, only “guides.” As such, there is usually some room to negotiate.