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How to calculate salvage value of a car?

Updated: Aug 29



In general, the salvage value of a car is the estimated value of an asset after its useful life is over and cannot be used for its original purpose. It is also known as scrap value or residual value. There is a formula for determining the salvage value, which is:

S = P(1-i)^y

S: salvage value, P: original price, i: depreciation rate, y: age in years.

This formula can be used for finding the salvage value of any asset, including cars. Still, as determining the salvage value of a car is more complicated, other methods are used for calculating it.


salvage value of a car

You might have been in a severe accident or crash where your car got totaled, or simply your vehicle might have reached its age limit and doesn't run anymore; regardless of the reason, you want to know the fair salvage value of your car to sell it or repair it if possible. Determining a salvaged car's value is not an easy task, and there is no clear-cut method to the process. However, some methods can be used to calculate the approximate value. In most cases, a salvaged car is worth approximately half of its original price, and some insurance companies even value it lower. If you want to get a fair value for your vehicle, it is advised to consult with a repair company that has established a very good reputation for a fair assessment. For example, if you have collision insurance coverage in the case of a car accident. In that case, you could make a property damage claim with your own insurance company and get better customer service and could even get paid quickly. However, it might not be as quick and as clear-cut with all the cases; there are deductibles to keep in mind, as well as the negligent driver issue if you decided to go with your company instead of the negligent driver's who totaled your vehicle.

Generally, there are two ways to settle your car's damages. The first is paying for the cost of your car's repairs, where you could get a reduced value payment as compensation for the hit in your car's value. This is to compensate you for the reduction in the value of your vehicle. The second way is paying you the car's actual cash value and totaling the vehicle. This could happen if your insurer realized that the cost of repairing your vehicle is way higher than its real worth, or that it would be unsafe to drive even after the repairs are completed, then they'll decide to total your car. In such a case, the insurer will pay you the actual cash value of your car, which is the number that will cost you to replace your car to get a comparable used one. Another insurance package called replacement cash value; if you have purchased this coverage, your insurer will pay you the price to replace your totaled car with a comparable new one. There could be a case where you prefer to keep your totaled vehicle and pay to have it repaired instead of replacing it. You can do this, but the salvage value of a car will be subtracted from what you are owed, and a salvage title would be issued.

A simplified definition of the salvage value of a car is the value you would get if the insurance company sold the car to a salvage yard for its frame or salvageable parts. The insurance firm's role is to determine the actual cash value of your car as if you were not going to buy it again and deduct a specific percentage for the salvage value. To determine the fair value of your car, consider the following factors:


  • Identify the model, make, year and mileage at the time of the crash

Variables like the year of manufacture, make and model of a car and its mileage affect its value and are important to consider. The value varies from one year to the other. As you can guess, the older the vehicle model, the less the salvage value of a car. This information can be found on the salvage title of a car or the car contract that you signed at the time of buy, or even your instruction manual.

  • Identify the trim of the car and any optional equipment

In a car, Trims are all the decorative parts that do not add functionality to the vehicle while enhancing the car's aesthetic and look. There are both exterior trims and interior trims. There are various trim packages, and they are used to determine the interior accommodations, engine size, appearance, and suspension components of a vehicle. In most cases, the trim can be indicated on the salvage title and is quite crucial in determining the value. It could also be included in the name of the car.

Other suggestions that are highly advisable for you to do to find out the fair value of your car includes searching online for the value of your vehicle if it did not have a salvage title. You can check out several websites that are reputable such as Kelly Blue Book, the National Automobile Dealers Association Used Car Guide (NADA), and Edmunds to figure out this value. Another suggestion to find a car's cost is to contact a trusted repair shop that won't try to weigh the value of the vehicle down and provide you with a fair valuation. You can also ask for the help of an insurance company. When you own a car, you are insured with an insurance company. You can consult with your insurer to get an estimation of your car's salvage value. The salvage value of a car varies from one place and source to another. It is essential and advisable to have all the necessary information and consider all the available options before committing to any deal and a specific value.


Suggested calculations to determine the value:

Using the websites mentioned before (like Kelly Blue Book), you can find out your car's retail value, which is the amount you'd ask for selling to a private party and the trade-in to dealer value of your vehicle. Next, add these two numbers and then divide the sum to get the average. This number is considered to be the actual cash value. You can repeat these steps using different values from several websites to figure out the real cash value with higher certainty.

There are some alternative methods to consider for figuring out the actual cash value of your car. If you believe the actual cash value offered by the insurance firm is too low in comparison to your calculations. In that case, you do some research on recent sales of comparable vehicles in your state's area on the Internet and verify that similar cars were actually sold at these prices. It is advisable to get three estimates. And as mentioned before, another option is to ask a car dealership or a trusted repair shop to give you an estimate of the actual cash value of your vehicle. You should consider that you may need to transport your car to the facility in such a case.

The next step is to calculate the salvage value of a car. The formula used for this calculation is slightly different for each insurance firm. But, they're some general rules that are applied to all of them. Generally, the costs of disposing of the car and the past auction values for salvaged cars will be considered; then, this figure will be subtracted from the actual cash value to determine how much you will be paid. To recap, this amount, as well as the deductible, will be subtracted from your real cash value. This final value is the likely amount you will get if you decide to keep your totaled vehicle.

The property damage claim for your vehicle after an accident can be surprisingly complicated, and you could have many decisions to make. We hope that you could figure out your car's fair salvage value easier with the explanations and the tips we provided.

Also if you are looking to buy an affordable used car, don't forget to check out the inventory of under $5,000 used cars.


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Monster Exports

With so many hand-picked clean and salvage title vehicles in stock, it's no wonder why Monster Exports has grown to be one of the top car export companies in the United States. Since 2012, we've dedicated our efforts to guiding and advising our clients about the best vehicles to purchase for export. We offer a wide range of options, and our professional team is here for your every need. Our prices can't be beaten, and we offer some of the fastest shipping times in the industry.
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