Vehicle Depreciation Compensation is one of the types of compensation that vehicle owners may seek in the ordinary course of life as a result of a potential traffic accident. Even minor or moderate accidents causing damage often impose significant financial burdens on vehicle owners. Therefore, it is of great importance for vehicle owners to be aware of their rights in this regard.
In this context, compulsory motor vehicle liability insurance (ZMMS) provides security for vehicle owners against the risk of an accident. Pursuant to Article 91 of the Highway Traffic Act No. 2918, compulsory motor vehicle liability insurance is mandatory for all motor vehicle operators. This insurance is designed not to cover the damages of the insured party, but rather the losses suffered by third parties. Accordingly, depreciation in the value of the non-liable or less-liable party’s vehicle, or the repair costs incurred, may be claimed from the compulsory liability insurer of the at-fault vehicle. What is essential at this stage is that the driver seeking compensation must not be the party primarily at fault for causing the accident.
1- Fault Ratio in Traffic Accidents and Objection to the Accident Report
In traffic accidents, the fault ratio is determined based on violations of the rules set out under the Highway Traffic Act No. 2918 and the Highway Traffic Regulation. The manner in which the accident occurred and the statements included in the accident report play a crucial role in identifying the drivers’ levels of fault. Therefore, the accident report is a document that must be prepared with due care.
Vehicle Depreciation Compensation
An accident report may be prepared either by traffic police or by completing pre-prepared forms made available to drivers. Typically, these accident report forms are used in minor accidents involving property damage, where the parties themselves complete and sign the report. In addition, the Insurance Information and Monitoring Center has developed a mobile application called “Sigortam360,” through which a digital accident report can be created. By downloading this application to a mobile phone, drivers may conveniently generate an electronic accident report without the need to carry physical report forms in their vehicles.
Since the accident report plays a significant role in determining fault, errors made in its preparation may lead to the loss of legal rights. Parties who believe that the report has been incorrectly prepared have the right to object. The period for objection to the accident report is five days. Such objections can be submitted via the official website of the Insurance Information and Monitoring Center (https://www.sbm.org.tr/) under the “Accident Report Inquiry and Objection” section. Additionally, fault ratios may also be checked in this section.
2.1- Primary Losses Arising from Traffic Accidents Involving Property Damage
It must first be noted that damages arising from death or bodily injury caused by traffic accidents fall outside the scope of this article and constitute a separate subject of analysis. The focus of this article is limited to material losses sustained by the vehicle as a result of a traffic accident.
Accordingly, the losses incurred by a vehicle owner whose vehicle is damaged in a traffic accident can be categorized as follows:
- Repair costs of the vehicle and, if necessary, the costs of replacement parts
- Loss of use during the repair period/Substitute vehicle costs
- Vehicle depreciation loss
In practice, vehicle repair and replacement part costs are generally paid directly by the insurance company to the technical service provider that performs the repair. Therefore, this category of loss is typically not the subject of litigation.
The compensation for loss of use of the vehicle refers to the economic loss incurred by the owner due to the inability to use the vehicle while it remains under repair. During this period, it is not necessary to rent a replacement vehicle. According to the precedents of the Court of Cassation, since the replacement vehicle cost reflects the loss arising from the inability to use the vehicle, the loss of use is determined based on the economic contribution of the vehicle during that period. However, it should be noted that the replacement vehicle cost does not fall within the scope of compulsory motor vehicle liability insurance (ZMMS), and therefore, it constitutes a head of damage that may be claimed directly from the opposing party. Furthermore, if the damaged vehicle is covered by comprehensive insurance, it must be examined whether the relevant policy provides the possibility of a replacement vehicle before making a claim against the other party.
Vehicle depreciation loss, on the other hand, refers to the damages suffered due to a reduction in the market value of the vehicle as a result of repairs performed following an accident. Since depreciation losses constitute the principal focus of this article, they are discussed in greater detail below.
2.2- The Concept of Vehicle Depreciation and the Determination of Loss
Vehicle depreciation refers to the decrease in the second-hand market value of a vehicle due to having been repaired following an accident. Regardless of how well a damaged vehicle is repaired, it will be valued less than a “non-accident” vehicle in the market. This situation is related to the fact that the accident disrupts the original integrity of the vehicle, negatively affecting its safety, aesthetic, and technical characteristics.
When calculating vehicle depreciation, several factors are taken into account, including the brand, model, age, mileage, prior accident history, the nature of the accident, and the method of repair. For instance, depreciation compensation for a relatively new vehicle with low mileage and no prior accident history will be higher than that for an older, high-mileage vehicle. Likewise, the use of equivalent (non-original) parts in the repair process also increases the depreciation. As a rule, original parts should be used whenever possible in the repair of a vehicle, and in cases where equivalent parts are utilized, the insurance company is obliged to inform the vehicle owner accordingly.
Similar to other damages arising from traffic accidents, vehicle depreciation loss is calculated in accordance with the annex to the General Conditions of Compulsory Motor Vehicle Liability Insurance. Accordingly, the calculation is made using the following formula, in which the market value of the vehicle serves as the basis, multiplied by coefficients derived from the relevant data concerning the vehicle.[1]
VD = Vehicle value loss
Market Value = Vehicle market value
R = Vehicle brand/model coefficient
K = Vehicle age and mileage coefficient
H = Damage ratio or accident nature coefficient
G = Repair method/condition of parts used coefficient
3. Stages of Compensation for Loss
3.1 Application to the Insurance Company
In order to claim compensation for vehicle depreciation either through litigation or arbitration, a written notice must first be submitted to the insurance company, requesting compensation for the loss sustained. This requirement is stipulated in both the Highway Traffic Act and the Insurance Law. However, minor differences exist between these two legal frameworks, which are significant when making applications. Specifically:
Pursuant to Article 97 of the Highway Traffic Act, compensation must first be demanded from the insurance company. If the insurer fails to respond to this application within 15 days, or if a dispute arises regarding the amount of compensation, the claimant may initiate legal proceedings. In contrast, Article 30/13 of the Insurance Law No. 5684 sets this period as 15 business days. In practice, the Insurance Arbitration Commission accepts the period as business days, in line with the Insurance Law.
Moreover, when applying to the insurance company, certain documents must be submitted together with the depreciation claim, as listed below:
- Officially certified copy of the Traffic Accident Report or a report prepared between the parties, together with any witness statements or observation records, if available,
- Registration certificate (title) of the damaged vehicle,
- Photographs or video recordings of the damaged vehicle and accident scene, if available,
- Bank account details of the injured party/vehicle owner (bank name, branch, and IBAN number),
- Written statement of the depreciation claim (together with proof of submission to the insurance company),
- Expert report, if an assessment has been conducted regarding the material damage.
3.2 Stage of Litigation or Application to the Arbitration Commission
If, following the written application to the insurance company, no payment is made or only partial payment is offered, the injured party may pursue the following legal remedies:
a) Application to the Insurance Arbitration Commission
The Insurance Arbitration Commission is an alternative dispute resolution mechanism that provides a fast and practical solution in insurance disputes. One of the key reasons why this mechanism is often preferred is that the arbitration process is less costly and concludes more quickly compared to judicial proceedings. Accordingly, vehicle depreciation claims are frequently brought before the Insurance Arbitration Commission in practice. However, since arbitration proceedings are conducted on the basis of written submissions, the claimant must substantiate his or her claims with proper documentation and evidence. It should also be noted that applications to the Commission may only be filed against the insurance company; claims for compensation against the individuals responsible for the damage must be pursued through judicial courts.
An application to the Arbitration Commission may be submitted online via the “Apply” tab in the “Online Transactions” section of the Commission’s official website, accessible through the e-Government login system. In this process, supporting evidence and documents relating to the dispute must also be uploaded to the system. Since the examination will be conducted solely on the submitted documents, it is crucial to ensure the accuracy of the information provided and to upload the relevant documents under the correct categories.
Alternatively, an application to the Arbitration Commission may also be made by completing the arbitration application form and sending it by post to the Commission’s address, together with the case file concerning the dispute.
Once an application passes the preliminary review stage, an arbitrator is appointed to the case. According to the regulations, after an arbitrator has been appointed, he or she must render a decision within four months.[2]
If, at the preliminary review stage, it is determined that the application cannot proceed due to reasons such as missing documents or incomplete payment of the application fee, half of the application fee will be refunded to the applicant.[3]
Time limits in arbitration proceedings may be significantly shorter than those applicable in judicial proceedings. For example, if an interim decision requiring the payment of an expert fee is notified to the applicant via email, a period of only three to five business days is typically granted. Similarly, the time limits for objecting to expert reports are also relatively short.
Furthermore, the monetary thresholds governing appeals and objections to arbitral awards differ from those applicable in judicial courts. As of May 21, 2025, arbitral awards in disputes under TRY 28,000 are final and binding. In disputes under TRY 300,000, there is a right to object to the award; however, in order to appeal to a higher court, the dispute must exceed TRY 300,000. In addition, the monetary threshold for appointing a panel of arbitrators instead of a single arbitrator is set at TRY 96,000. For disputes exceeding this amount, the appointment of an arbitral panel is mandatory.
b) Filing a Lawsuit Before Judicial Courts
In lawsuits brought before judicial courts for vehicle depreciation claims, the demand may be directed at multiple parties. Primarily, compensation may be sought from the insurance company that issued the compulsory liability insurance of the at-fault vehicle. Such cases fall under the jurisdiction of the Commercial Court of First Instance. Additionally, pursuant to the provisions of the Turkish Code of Obligations (TCO) regarding tort liability, it is also possible to file a lawsuit against the vehicle owner and driver. If the claim is brought solely against the owner and driver, without including the insurance company, the case will be heard before the Civil Court of First Instance. However, if claims are brought simultaneously against the insurance company as well as the vehicle owner and driver, the competent court is the Commercial Court of First Instance.
In lawsuits filed against insurance companies, prior application to the insurer is mandatory under the Insurance Law. Failure to make such an application will result in the dismissal of the lawsuit on procedural grounds.
According to Article 110/2 of the Highway Traffic Act, the competent court may be either the court of the place where the accident occurred, or the court located in the district where the insurer’s branch or the agent that issued the policy is situated.
c) Statute of Limitations
Traffic accidents are legally classified as torts, and therefore the general statute of limitations applicable to tort claims also applies to claims arising from traffic accidents. Claims such as vehicle depreciation must be brought within two years from the date of the accident. Article 109 of the Highway Traffic Act No. 2918 provides that: “Claims for compensation of material damages arising from motor vehicle accidents shall be barred by statute of limitations two years from the date on which the injured party learns of the damage and the liable party, and in any event, ten years from the date of the accident.”
For the compensation of damages sustained by a vehicle as a result of a traffic accident, the statute of limitations begins as of the accident date, from the moment when the liable parties and the existence of the damage are known.
5. Supreme Court Practices
According to the rulings of the Court of Cassation, vehicle depreciation falls within the liability arising from the compulsory motor vehicle liability insurance (ZMMS) policy. The insurance company is obliged to make payments within the policy limits. Although factors such as the vehicle’s age and mileage are taken into account when calculating depreciation, these criteria cannot constitute grounds for outright rejection of the claim. For instance, in one of its rulings, the 17th Civil Chamber of the Court of Cassation stated that even an 11-year-old vehicle with 200,000 km may suffer a loss in value due to an accident. This demonstrates that the categorical exclusion of older vehicles from depreciation claims is contrary to law.
“In the expert report relied upon by the court, it was determined that there would be no depreciation on the vehicle simply because the vehicle was 11 years old, without evaluating whether the repair was economical or whether the vehicle should have been declared a total loss. The expert report relied upon by the court did not correctly calculate the depreciation. The determination of depreciation was made by a general assessment without adhering to the criterion adopted by our Chamber, which is the difference between the undamaged second-hand market value of the vehicle at the date of the accident and its repaired second-hand market value thereafter.”
“The depreciation suffered by the vehicle should be calculated by determining, under free market conditions as of the accident date, the second-hand market value of the vehicle in undamaged condition and, taking into account the vehicle’s make, model, extent of damage, and the characteristics of the damaged parts, the second-hand market value of the vehicle after repair, with the depreciation being the reduction (difference) between these two amounts… With the plaintiff’s counsel’s appeal being accepted, the judgment is REVERSED.” (Court of Cassation, 17th Civil Chamber, 2016/7272 E., 2017/867 K.)
Nevertheless, it should be borne in mind that attributes such as mileage and age determine the compensation amount, and that vehicles with high mileage and older models will generally have a lower calculated depreciation.
6. IN BRIEF
Compulsory motor vehicle liability insurance aims to protect third parties and maintain social order by covering third-party damages arising after traffic accidents. Within this scope, claims for vehicle depreciation and repair expenses are compensable items to be requested from the insurance company. In practice, insurers directly pay repair costs to the technical service center, but a separate application to the insurer is required for vehicle depreciation. If no payment is made after such application, the claimant may resort to litigation or arbitration. As explained in our article, applying to the Insurance Arbitration Commission is more frequently preferred in practice due to its practicality and its ability to produce results in a shorter period of time.
REFERENCES
- Highway Traffic Act No. 2918
- Insurance Act No. 5664
- General Terms and Conditions of Compulsory Motor Vehicle Liability Insurance
- Regulation on Insurance Arbitration
- https://karararama.yargitay.gov.tr/
- Official Gazette dated 21/05/2025 and No. 32906 (Monetary Limits)
- [1] General Terms and Conditions of Compulsory Motor Vehicle Liability Insurance
- [2] Regulation on Insurance Arbitration
- [3] Regulation on Insurance Arbitration
Atty. Esra DOĞDU
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