January 10, 2022

How Do Insurance Companies Value Cars?

Which factors go into determining actual cash value?

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Auto insurance companies assign a value to your car that they use to calculate the amount of money they will pay you when it’s damaged or destroyed in a covered incident. That valuation matters if you need to make repairs, and it matters even more if your car is totaled. Will you get back the money you paid, and is there an objective way to determine how valuable your car is? We’ll answer all these questions and more surrounding your car’s actual cash value, or ACV.

How Do Insurance Companies Value Cars?

To explain how insurance companies value cars, first we need to explain what ACV is.

What Is ACV?

ACV is the amount of money your car is worth today, taking depreciation into account. Essentially, your car depreciates as soon as you drive off the lot, so ACV isn’t the amount you paid for your car; it’s how much you could sell it for today. This will almost always be less than what you paid, even if you bought your car yesterday.

Why is ACV important, you ask? Because it determines how much your insurance provider will pay you in the event that your insurer declares your car “a total loss.” In a nutshell, if the cost to fix damage to your car is higher than a certain percentage of your car’s ACV, it’s declared a total loss. In the event your car is totaled under a covered claim, you’ll get reimbursed for its ACV (minus your deductible).


Your state or your insurance company decides what percentage of your vehicle’s ACV the damage must exceed for your car to be considered totaled after an accident.

How Do Insurance Companies Determine a Car’s Value?

Insurance companies determine a car’s value by considering factors such as:

  • Mileage
  • Year
  • Make
  • Model
  • Optional equipment
  • Wear and tear
  • Accident history

The companies either use their own proprietary software or third-party software to calculate the ACV based on the above factors.

Which Factors Reduce ACV?

Your car’s ACV will be lower if your car has been damaged in an accident previously, has high mileage, or has abnormal wear and tear. Learn more about the cost of car insurance after accidents.

Agreed Value vs. Stated Value

There are alternatives to ACV, however:

  • Agreed value: Agreed value is often used when insuring classic cars. The insurance company and the policyholder agree on the value of the vehicle when they write the policy. That means that in the event of a total loss, the policyholder will be paid the agreed value regardless of how much the car has depreciated.
  • Stated value: Stated value is also used with classic car insurance. The policyholder obtains documentation that lists the stated value of the car to the insurance company, instead of the other way around.1 That being said, the policyholder may not receive the full stated amount if the car is damaged or stolen.2

How to Figure out the Value of Your Car for Auto Insurance

To determine the value of your car for auto insurance, consult either Kelley Blue Book (KBB) or the National Automobile Dealers Association (NADA).3 They have free resources that offer car valuation estimates. Note that every used car’s value is unique, based on many factors. If your car is totaled, you can decide if you want to buy it from the insurance company and repair it yourself (but the car will now have a branded title) or accept a payment of its ACV to use toward a replacement vehicle.

How to Negotiate ACV

Since many factors determine ACV, you can negotiate it with your appraiser by using a few tactics:

  • Make sure your appraiser has correctly included all your vehicle’s options as well as any aftermarket accessories you’ve installed, as these may increase your car’s value.
  • Research recent local sales of the exact year, make, and model of your vehicle, and discuss them with your appraiser.
  • If you still can’t agree on an ACV, hire a private appraiser to provide an ACV.
    Use the information you found via KBB or NADA when speaking with your appraiser(s).4


Hiring a private appraiser can cost $200 to $300, which you’ll have to pay out of pocket.

Total Loss

Your car’s ACV is a major component when your insurance company is deciding whether to declare your car a total loss, but let’s make sure we know what that term really means.


A car is a total loss or totaled under any of these conditions:

  • Your vehicle can’t be repaired safely.
  • Repairing your vehicle will cost more than its estimated value.
  • The damage to your vehicle meets your particular state’s total loss guidelines, detailed below. 5
State Car total loss threshold
Alabama 75%
Alaska Total loss formula
Arizona Total loss formula
Arkansas 70%
California Total loss formula
Colorado 100%
Connecticut Total loss formula
Delaware Total loss formula
Florida 80%
Georgia Total loss formula
Hawaii Total loss formula
Idaho Total loss formula
Illinois Total loss formula
Indiana 70%
Iowa 70%
Kansas 75%
Kentucky 75%
Louisiana 75%
Maine Total loss formula
Maryland 75%
Massachusetts Total loss formula
Michigan 75%
Minnesota 70%
Mississippi Total loss formula
Missouri 80%
Montana Total loss formula
Nebraska 75%
Nevada 65%
New Hampshire 75%
New Jersey Total loss formula
New Mexico Total loss formula
New York 75%
North Carolina 75%
North Dakota 75%
Ohio Total loss formula
Oklahoma 60%
Oregon 80%
Pennsylvania Total loss formula
Rhode Island 75%
South Carolina 75%
South Dakota Total loss formula
Tennessee 75%
Texas 100%
Utah Total loss formula
Vermont Total loss formula
Virginia 75%
Washington Total loss formula
West Virginia 75%
Wisconsin 70%
Wyoming 75%6

How Is Total Loss Determined?

Three factors determine total loss:

  • Total loss threshold
  • ACV
  • Guaranteed asset protection insurance, or gap insurance

Insurance companies compare the ACV to the total loss threshold to determine if a vehicle is a total loss or if it’s worth the cost to repair. In many cases, the replacement cost will be less than the repair cost, so car replacement may be a better option.

What If My Total Loss Payoff Is Less Than What I Owe on My Loan?

If you still have a car loan on your totaled car, you may receive a total loss payoff that’s less than the balance of your loan. Do you still have to pay off of your loan?

Unfortunately, yes, you’ll need to repay the rest of your loan even if the total loss payoff doesn’t cover it. That’s the exact reason why people get gap insurance, which covers the difference between the payoff you receive from the insurance company and the amount you owe on your loan. Gap insurance often includes collision and comprehensive insurance.

What to Do When You Still Owe Money on a Totaled Car

If you still owe money on a totaled car, you may need to look into auto loan refinancing if you can’t afford your monthly payments.7 Otherwise, if the accident was the other driver’s fault, you can look into hiring a lawyer.


Read our auto insurance FAQs to learn more about topics such as SR22s, whether you can pay less than Blue Book, and what affects car insurance rates. There are a ton of insurance products, from life insurance to renters insurance, but when it comes to auto insurance, we’re the experts.


  1. Agreed Value vs. Stated Value: What’s the Difference? American Family Insurance. (2022).

  2. Everything You Need to Know About Agreed Value Insurance. Car and Driver. (2021, May 13).

  3. Consumer Vehicle Values. NADA Guides. (2022).

  4. Actual Cash Value: How it Works for Car Insurance. Kelley Blue Book. (2021, Nov 9).

  5. GEICO’s Total Loss Process. Geico. (2022).

  6. AUTOMOBILE TOTAL LOSS THRESHOLDS IN ALL 50 STATES. Matthisen, Wickert & Lehrer, Attorneys at Law. (2021, Dec 15).

  7. My Car Was Totaled But I Still Owe Money on It. NOLO. (2022).