Loss in value after an accident: Compensation without selling your car?

A repaired car may still be worth less

After significant accident damage, a properly repaired vehicle may be worth less on the used-car market than a comparable accident-free car. This remaining difference is known in German law as merkantiler Minderwert, or diminished market value. It is a separate loss in the value of the vehicle, rather than an outstanding repair bill. The BGH explains this by reference to prospective buyers’ reservations about accident-damaged vehicles (VI ZR 205/23, paragraphs 8 to 9).

Section 251(1) of the German Civil Code (BGB) provides the legal basis for compensating this remaining loss. The other party must still be liable for the accident, and the relevant loss in value must be established. The judgment does not provide a fixed percentage of repair costs or a payment for every minor scratch.

You do not need to sell the car first

The BGH expressly states that a sale is not a requirement for the claim. A person who continues to drive the repaired car still owns an asset with a lower market value. Nor does the prospect of the loss in value decreasing with continued use eliminate the claim. The relevant loss is the one existing when the car returns to use after the repair (paragraph 10).

To determine the amount, however, a hypothetical sale is considered. The comparison is between the price achievable after the repair and the price that could have been achieved without the accident damage. The court estimates the amount on the specific facts under section 287 of the German Code of Civil Procedure (ZPO) (paragraphs 11 and 14). Our practical assessment: A reasoned valuation is more useful than simply stating that the car now has an accident history.

The BGH case: Why the deduction needed to be reconsidered

In the case decided by the court, an expert assessed the diminished value at EUR 500. The other driver’s liability insurer paid only EUR 420.17, deducting an amount corresponding to the VAT component. The claimant, who was entitled to deduct input VAT, sought the remaining EUR 79.83. She argued that the report had already used net values (paragraphs 1 to 3).

The BGH set aside the appeal judgment and remitted the case. This was not a final award of EUR 79.83. There were insufficient findings on the price basis used by the expert (operative part; paragraphs 25 to 26). The decision dates from 2024 and is discussed here as a basis for reviewing deductions today.

VAT: The basis of the calculation is decisive

Compensation for diminished market value is itself outside the scope of VAT. However, the BGH requires the estimate to be based on net selling prices. As a matter of law, this applies whether the injured party is a business or sells privately. The prices a private seller could actually achieve remain a separate factual question (paragraphs 12 to 15 and 19 to 20).

If the diminished value was calculated from gross selling prices, an amount corresponding to the VAT component must be deducted. If net prices were already used, this does not justify a further deduction. The wording “VAT-neutral” in a report does not by itself establish which underlying prices were used (paragraphs 16 and 25 to 26).

For your settlement, this means that entitlement to deduct input VAT alone does not justify a blanket deduction. Equally, it is too broad to claim that a deduction is never permitted for private individuals. Have the calculation basis clarified. If the report lacks an explanation, a reasoned supplementary statement should be obtained.

The limits and documents that matter now

Full liability was undisputed in the BGH case. Liability may be allocated differently in an accident involving several vehicles: section 17(1) and (2) of the German Road Traffic Act (StVG) requires an assessment of their specific contributions to the accident. The amount of damage to the vehicle and the share actually recoverable are therefore separate questions. With leasing or third-party ownership, it is also necessary to establish who holds the claim and who may pursue it.

Our recommendation for preparing your case: Ask for reasons for the specific deduction and review diminished value as a separate item. A general settlement statement covering repair costs does not answer this question.

• Keep the accident account, photographs and the insurer’s position on liability.
• Have the complete expert report available, including the calculation and vehicle values used.
• Gather proof of repairs, details of previous damage, mileage and ownership.
• If an amount corresponding to VAT was deducted, ask specifically whether the estimate used gross or net selling prices.
• Before signing a final settlement agreement, have it checked for whether the remaining loss in value has been taken into account.