What is Actual Cash Value of Your Car?

what is actual cash value (ACV)
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The actual cash value of your car is a determining factor in the car insurance rate you will pay and it also determines the line of action from your insurer when you file a claim. If your car is declared a total loss after an accident, the insurance company will pay out your car’s actual cash value (ACV).

Although insurance companies are not completely truthful about how they measure what the ACV of a car is, we can bring certain factors together to give us a clue of what ACV is. Knowing what is your car’s actual cash value is important seeing it comes into play when your car is totaled.

Your car is totaled after an accident when your insurance company decides that the cost of repairing your car is more than a certain percentage of your car’s ACV. In such a situation, your insurer will pay for you the actual cash value of your vehicle instead of just paying to cover the cost of repairing your vehicle.

Chances are that your insurer may reduce the valuation of your car in a bid to earn a profit and if you are ignorant of what ACV is, you are surely going to be on the wrong side of the line. Now the big question is, how do insurance companies calculate ACV?

While it is impossible to give a straightforward answer about how ACV is calculated, we can say for sure that ACV is determined based on some industry formulas and metrics. Insurance companies have different approaches to it so there is no binding standard.

The goal of this article is to show you how ACV is calculated so that if your insurer is seemingly under-valuing your vehicle, you may be able to dispute it. Also, I will be showing you how ACV is calculated and the steps involved in countering your insurer’s valuation of your car.

Without further ado, let’s delve into these issues.


What is Actual Cash Value (ACV)?

The Actual Cash Value or ACV of a car is the amount of money that your car insurance company will pay you if your car is stolen or declared a total loss after an accident. The ACV of your car is the value of your car before it was involved in the accident or stolen and it is determined by your insurance provider.

Your insurance company will pay you the full amount of the value of your car as they have determined excluding whatever deductible you are owing them. Your insurer determines your vehicle’s ACV based on some factors that includes car usage, past accidents, age of your car, and wear & tear to your vehicle.

Even if you have not had accidents or driven your car for so long, no insurance company will pay you the exact amount you paid when buying the car. Your car maybe a few months old and you will still get something lower in value than what you originally paid for.

Hence, you are not looking to get the actual cash value of your vehicle even though that is what the name implies, you are gunning for a considerable amount. Remember, I cited that auto insurance companies may try to undervalue your car and if you are oblivious of how ACV is calculated you may be going home with very little.

I am not saying auto insurance companies are dishonest. It is better to know what benefits you stand to gain as the players in the insurance industry are quick to capitalize on ignorance.


How Actual Cash Value (ACV) is calculated?

Car insurance companies do not reveal exactly how they calculate the actual cash value of a car. Like I highlighted above, insurance companies use a number of factors to calculate a vehicle’s ACV. These factors include:

  • The age of your car
  • Mileage
  • Claims you have made in the past
  • The value of other cars that are of the same make and model as yours
  • Effect of wear and tear of the vehicle

These are some of the factors used in calculating the ACV of your vehicle. Insurance companies will intimate you on how these factors play out in calculating the actual cash value of your car.

Should your ACV as determined by your insurer be a little bit lower than expected, you can dispute it. Let me show you how.

How to Dispute the ACV by your Insurance Company

You can dispute the ACV offer of your insurance company if it is lower than your expectation or you feel your car is worth more than what your insurance company has come up with.

To dispute the offer of your insurer concerning your ACV, you need to show your insurer that your car would be worth more at fair value. This you can do by searching for cars on sale in an area that is similar to yours. The similarity should be based on make, model, mileage, accident history, and other specs.

Do not just depend on online marketplaces but visit dealerships where they sell cars to determine what your car will cost. Also, contact independent valuation companies to see how much cars are worth and show your findings to your insurer.

Visiting a dealership store to get your car professionally appraised will help you know how much your car is worth. If your car gets totaled, the appraisal already gives a recent record of your car’s value. Present this value to your insurer if you feel cheated about the value of your car.


Insurance Policy Option to Augment Your Car’s Actual Cash Value

There are two (2) insurance policy options that can help you should your car be totaled. They are new car replacement coverage and gap insurance coverage. To wrap up this article, I have explained what these coverage options are.

New car replacement coverage and gap insurance coverage are additional coverage options to your car insurance policy. It is almost inexpensive to add the gap coverage to your auto insurance policy but the new car replacement coverage option is quite expensive.

Gap insurance pays off the gap between the ACV of your car and the amount you owe your insurer as a loan or lease. This is how it works.

Suppose your car is totaled and you are still paying loans on it, you are still going to pay up the amount even when you are not in the custody of the car. What gap insurance does is that it pays up the loan that is hanging after your car has been totaled.

As for new car replacement coverage, it is open to persons who are the first owners of their vehicle and the vehicle is not more than two years old. The new car replacement coverage option will pay you more than your car’s ACV.

This coverage option will see your car insurance provider pay you enough to purchase a new car after the old one has been totaled. You can get a new car that is the same as the totaled car or one that is identical.  

Brodrick Emmanuel Ebube
Brodrick Emmanuel Ebube is the content manager at He works with other contributors from the ideation of content and down to its execution. He ensures that all articles published on our blog meet international standards, and are well-optimized for search engines. Connect with him on Twitter - @gospelcaster_ng

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