"Diminished Value" Charges
Dec 7, 2010, 1:53 pm
#1
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"Diminished Value" Charges
One of my employees was recently involved in an accident in an Avis rental car. He was backing out of a parking space when he was hit by another vehicle. It was deemed to be his fault since the other car had the right-of-way.
The invoice we received from Avis for the repairs is fairly straightforward except for an $800.00 charge for "Diminished Value."
The rental agreement doesn't appear to make any accommodation for diminished value charges and I couldn't find any mention of the phrase in this forum.
Has anyone seen this before? Is the company really on the hook for this fee?
The invoice we received from Avis for the repairs is fairly straightforward except for an $800.00 charge for "Diminished Value."
The rental agreement doesn't appear to make any accommodation for diminished value charges and I couldn't find any mention of the phrase in this forum.
Has anyone seen this before? Is the company really on the hook for this fee?
Dec 8, 2010, 10:33 am
#3
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It could fall under "administrative charges", or at least that'd be their way of defending it.
Diminished value does happen after some accidents and it's an expense that the rental company has to pay for. In British Columbia for example, and accident over $2,000 will put a declaration, or "dec" on the title. As soon as a buyer sees the dec, it will lower the asking price for sure, i.e. the price that the car could fetch from a dealer who's buying to re-sell.
So, the charge itself COULD be legit, but the amount not so much. I would join in saying to fight it. Ask them for an independent appraisal that supports the loss amount that they're claiming. For example, something that says an ordinary Ford Taurus would fetch $13,000 from a dealer but this one will only get $12,200. If they can't produce that or refuse to, don't pay it.
Diminished value does happen after some accidents and it's an expense that the rental company has to pay for. In British Columbia for example, and accident over $2,000 will put a declaration, or "dec" on the title. As soon as a buyer sees the dec, it will lower the asking price for sure, i.e. the price that the car could fetch from a dealer who's buying to re-sell.
So, the charge itself COULD be legit, but the amount not so much. I would join in saying to fight it. Ask them for an independent appraisal that supports the loss amount that they're claiming. For example, something that says an ordinary Ford Taurus would fetch $13,000 from a dealer but this one will only get $12,200. If they can't produce that or refuse to, don't pay it.
Dec 8, 2010, 11:34 pm
#4
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Thanks for the feedback.
They did assess a separate $75 administrative fee as well as a loss-of-use fee ($110), on top of the diminished value charge and actual cost of repairs ($1,300). They're asking for a total of roughly $2,300.
The local Avis licensee (the vehicle was rented at the Mobile, AL airport) is insisting we pay by check. They could be attempting to guard against the chargeback scenario that was mentioned. It also rankles that they took more than a month to send the documentation and invoice--the car was fixed almost immediately--but are demanding immediate payment.
They cited "a formula established by Crawford & Company, and generally accepted in the industry" for calculation of diminished value. It is 10% of the vehicle cost, plus 20% of the repair bill, with the total being divided by 2.
We've got a business to run and I'm frankly not spoiling for a fight. As a favor to the employee, we're not having him report this to his personal insurance and Amex coverage is secondary, so we're on our own here.
They did assess a separate $75 administrative fee as well as a loss-of-use fee ($110), on top of the diminished value charge and actual cost of repairs ($1,300). They're asking for a total of roughly $2,300.
The local Avis licensee (the vehicle was rented at the Mobile, AL airport) is insisting we pay by check. They could be attempting to guard against the chargeback scenario that was mentioned. It also rankles that they took more than a month to send the documentation and invoice--the car was fixed almost immediately--but are demanding immediate payment.
They cited "a formula established by Crawford & Company, and generally accepted in the industry" for calculation of diminished value. It is 10% of the vehicle cost, plus 20% of the repair bill, with the total being divided by 2.
We've got a business to run and I'm frankly not spoiling for a fight. As a favor to the employee, we're not having him report this to his personal insurance and Amex coverage is secondary, so we're on our own here.
Last edited by PhillyInvestor; Dec 8, 2010 at 11:39 pm Reason: Additional Details
Dec 9, 2010, 5:04 am
#5
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"As a favor"? If he's on the clock for you, I gotta think that you'd cover the insurance regardless of any "favors". There should be no reason that the employee should ever report this to their personal insurance. Your business policy should cover your employees while on your business.
Dec 9, 2010, 9:27 am
#6
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At any rate, even though the business is paying, the expense will partly come from his pocket, as he is an owner. His share will be more than the deductible on his personal policy, so he initially wanted to report it to his own insurance. After considering the impact it would have on his premiums going forward, however, we concluded that it would be better to pay for it using company funds.
There is no applicable business insurance policy.
Last edited by PhillyInvestor; Dec 9, 2010 at 9:46 am Reason: Clarification
Dec 9, 2010, 1:21 pm
#7
Moderator: Avis and Rental Cars
Join Date: Oct 2006
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Have they provided you with a fleet utilization report for the time the car was being fixed? Most credit card insurance will require them to submit this so they can tell if they were sold-out or not during the period the car was out of service. Otherwise, it wasn't really costing them anything from "loss of use" because it would have just been another car sitting on their lot.
Back to the original "diminished value": Can you search the internet to see what really is the "generally accepted" calculation? And also require Avis to show you where in the contract that it states they can charge this to you?
Back to the original "diminished value": Can you search the internet to see what really is the "generally accepted" calculation? And also require Avis to show you where in the contract that it states they can charge this to you?
Dec 9, 2010, 1:39 pm
#8
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"Alabama law does provide the collection of loss of use and does not specify the requirement of 100% utilization ... Our loss of use is determined as follows. Our utilization for November 2010 was at 56.2%. The average daily vehicle revenue was $39.74. The car was in the repair facility for five days ... $39.74 x 5 x .562 = $111.67."
I think the strongest argument is to ask where in the contract it requires us to pay for diminished value. I certainly can't find it anywhere. Respecting the calculation itself, it actually seems fairly conservative compared to some that I've discovered in my research. (Though, to be fair, all of those were on plaintiff attorney websites.)
Dec 10, 2010, 7:00 am
#9
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Just wanted to make an aside here, as loss-of-use fees are commonly disparaged on FlyerTalk:
IMHO, it would be fair for loss of use to equal to the rate the car was rented on.
After all, you are, in effect, keeping the car on rent for five extra days.
Rental companies don't give you a break when you rent a car simply because their utilization wasn't 100%. Could you imagine calling up a rental agency sitting at 10% utilization and expecting them to only charge you 10% of the normal rate because "the car would otherwise be sitting"?
So, the fact they're only charging you $22.33 per day for the five extra days you rented the car is pretty fair--most likely a good bit less than the original reservation was for.
That said, I realize you didn't bring up a dispute regarding the loss-of-use fees in this thread, so I'm not intending to argue with you. I'm simply making this point on a public discussion thread.
I'm also extremely surprised they included such detailed figures in their letter to you. Normally, those types of figures--fleet utilization levels and daily dollar average--are tightly-held numbers, as knowledge by competitors could give them a competitive advantage.
"Alabama law does provide the collection of loss of use and does not specify the requirement of 100% utilization ... Our loss of use is determined as follows. Our utilization for November 2010 was at 56.2%. The average daily vehicle revenue was $39.74. The car was in the repair facility for five days ... $39.74 x 5 x .562 = $111.67."
After all, you are, in effect, keeping the car on rent for five extra days.
Rental companies don't give you a break when you rent a car simply because their utilization wasn't 100%. Could you imagine calling up a rental agency sitting at 10% utilization and expecting them to only charge you 10% of the normal rate because "the car would otherwise be sitting"?
So, the fact they're only charging you $22.33 per day for the five extra days you rented the car is pretty fair--most likely a good bit less than the original reservation was for.
That said, I realize you didn't bring up a dispute regarding the loss-of-use fees in this thread, so I'm not intending to argue with you. I'm simply making this point on a public discussion thread.
I'm also extremely surprised they included such detailed figures in their letter to you. Normally, those types of figures--fleet utilization levels and daily dollar average--are tightly-held numbers, as knowledge by competitors could give them a competitive advantage.
Dec 16, 2010, 8:01 pm
#10
Join Date: Nov 2009
Posts: 121
sign up for amex premium car rental policy. i just did..it is free to sign up and if you rent a car it is the PRIMARY insurance for up to 100,000. it costs 17.95 for up to 42 day rental. that is for the whole rental period not DAILY. so it will pay out and you never have to involve your own insurance. you obviously have to use the amex card when renting.
Dec 16, 2010, 8:09 pm
#11
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sign up for amex premium car rental policy. i just did..it is free to sign up and if you rent a car it is the PRIMARY insurance for up to 100,000. it costs 17.95 for up to 42 day rental. that is for the whole rental period not DAILY. so it will pay out and you never have to involve your own insurance. you obviously have to use the amex card when renting.
It also includes some personal accident insurance benefits.
Details here: https://www295.americanexpress.com/p...do?source=CCSG
Good program, and I use it, although if I'm renting for one or two days (or up to three days if in LAX or NYC, where LDW typically runs about $9 or $10), I'll skip the Amex and buy LDW straight from the rental company, as it is a comparable price and LDW significantly reduces the hassle if something happens.
Dec 17, 2010, 3:41 pm
#12
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We signed up after the incident. It's worth noting, though, that this policy only would have covered the $1,300 in repair expenses. The other $1,000 in fees would still have been out of our own pocket, as the Amex policy specifically excludes coverage for administrative charges, loss-of-use (Avis policy is not to provide the required fleet logs), and diminished value.
Dec 17, 2010, 9:05 pm
#13
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I like to claim credit for that, since I put up a huge stink in 2008 when they wouldn't cover LOU charges, and I wrote several strong letters to various executives pointing out that their primary competitors--MasterCard and Visa--both included coverage for LOU. About six months or a year after that, the T&C were modified.
Dec 17, 2010, 9:06 pm
#14
Join Date: Nov 2009
Posts: 121
We signed up after the incident. It's worth noting, though, that this policy only would have covered the $1,300 in repair expenses. The other $1,000 in fees would still have been out of our own pocket, as the Amex policy specifically excludes coverage for administrative charges, loss-of-use (Avis policy is not to provide the required fleet logs), and diminished value.
Dec 17, 2010, 9:09 pm
#15
Join Date: Nov 2009
Posts: 121
Don't know about administrative fees and diminished value charges, but IIRC, Amex recently (within the last two years) modified their T&C to now include coverage for LOU charges.
I like to claim credit for that, since I put up a huge stink in 2008 when they wouldn't cover LOU charges, and I wrote several strong letters to various executives pointing out that their primary competitors--MasterCard and Visa--both included coverage for LOU. About six months or a year after that, the T&C were modified.
I like to claim credit for that, since I put up a huge stink in 2008 when they wouldn't cover LOU charges, and I wrote several strong letters to various executives pointing out that their primary competitors--MasterCard and Visa--both included coverage for LOU. About six months or a year after that, the T&C were modified.
