What is the difference between Actual Cash Value and Replacement Value?

My truck was totalled when rear ended and I want them to pay replacement value so I can junk it since repair will exceed its value.





How does an insurance company determine its value? Do they use Kelly Blue Book? Black Book? My truck was 10 years old but only had 70k miles on it and the engine was rebuilt only a year ago. So wouldnt the low miles and new engine raise the value since I have not found any same truck with such low miles before.What is the difference between Actual Cash Value and Replacement Value?
Replacement value - is what you replace the car with.





So if you have a 1995 Honda civic and replace it with a 2005 Honda civic - then the replacement value is the cost of the 2005 Honda civic. That's what you replaced it with.





Actual Cash Value - the what the damaged vehicle could have sold for given it's age, condition, mileage, options just prior to the collision. It's that specific vehicles fair market value.





No insurance company uses Kelley Blue Book. If you read the fine print for their retail value - it says that is the starting point for negotiations and not what a vehicle would sell for. It also says that price includes advertising and sales commissions. They don't use Black Book or Red Book.





If the company uses a book - it will be the NADA (National Automobile Dealer Association) book. This is the industry standard. It's also the one that most banks use when deciding if they should loan you money to purchase a used vehicle. Their web site is www.nadaguides.com





Most companies use the regional book not the web site. The web site gives a national value. And a car's value can be affected by where you live. For example - a 4 wheel drive truck is going to be worth more in Colorado than in Florida. People have more need for 4 wheel drive vehicles in Colorado than in Florida. But the 2 seat-er convertible sportster....probably worth more in Florida than on Colorado.





The regional book may not be the same value as the web site - but it should be with in a couple of hundred dollars of the web site.





If you go to the book store - they will probably have a print copy of the NADA (its a short fat yellow cover with blue writing). Again, book stores usually have a national copy rather then the regional book - but it's value will be close to what the regional book shows.





When I settle using the NADA - I take the book out and show the values to the customer.





The company will take the book value and adjust it (up or down) based on your car. For example, the tires on your truck are worn and need to be replaced. A retail priced vehicle expects there to be good tires on the truck. So a deduction would be made to the retail value for the cost of new tires.





If you had work done on the truck - give the insurance company copies of the receipts. Some stuff you do to a vehicle - does not add value. You do that because you have to so the vehicle runs. Some may add value. It does not usually add as much as you paid....but some things can help.





The most important thing to keep in mind - is most private passenger autos are in average condition. Every one thinks their car is a peach when it gets totaled. But most are just average condition - even mine. Really --- did you wash the door hinges when you cleaned the car? Change the oil every 5000 miles? Have the engine steam cleaned? Some people do this and the insurance company can tell. But these cars are few and far between.





Some companies use a market survey program. CCC and Total Logic are 2 such programs. These programs determine the value of your vehicle based on recent sales of similar vehicles. Then it adds and subtracts to your vehicle based on differences between your vehicle and the comparable vehicle (for example, your vehicle has less mileage than the comp vehicle so it would add to your vehicle value for that).





These market surveys are probably the best reflection of what a vehicle is worth. If the company uses one of those - ask to see it. I show them to customers.What is the difference between Actual Cash Value and Replacement Value?
Basically they find what an average truck of that model and year is going for in your area and that's what they give you. If you fight real hard you may be able to get a bit more but not much.
I've never encountered an insurance company that uses Kelley Blue Book. Most that I have dealt with use NADA, but don't bother with the website. Dealers and insurance companies use a regional figure that will either be higher or lower than the one you get online (they take your zipcode purely for tracking usage).


Your rebuilt engine adds no value. When I do market surveys, dealers would wonder aloud, if it needed an engine rebuild at 70k miles, what has the owner been doing with it and what will go wrong next?


The low mileage will help.


Once they start with that base value, either NADA or market surveys or whatever they use (the insurance company should be able to tell you what they use) They will deduct for the cost to repair any damage that was already on the vehicle prior to the accident - rust, dents, etc.


The resulting figure is the actual cash value. This is what you are owed in the event of a total loss.


You will have the option of accepting the full ACV and having them take your truck or taking the ACV less the salvage value and keeping it.


Also, your ability to replace the vehicle may be an issue of credit. You might have to pay more if you are hard to finance, and the insurance company does not owe for that