Three terms decide how the claim is settled. A worked example shows when a repair is still worthwhile despite the higher cost.
In short: An economic total loss exists where the repair costs exceed the replacement cost, that is the replacement value less the salvage value. You may nevertheless have the vehicle repaired, as long as the repair costs and the market-based diminished value together do not exceed 130 percent of the replacement value, you repair fully in accordance with the appraisal report, and you keep using the vehicle for six months.
These three figures decide how your claim is settled. They stand in a simple relationship to one another: the replacement cost is the replacement value less the salvage value. All three are determined by the appraiser in the report, and any deviation in one of them shifts the outcome of the entire settlement.
The replacement value is the price you would have to pay on the regional market for an equivalent replacement vehicle, based on its condition immediately before the accident. So it is not the price you paid at the time, nor a theoretical dealer purchase price, but what a comparable vehicle actually costs in your region.
The salvage value is the amount still obtainable for the damaged vehicle in its post-accident condition. It too is determined on the regional market accessible to you. The appraiser usually obtains at least three offers for that purpose.
The replacement cost is the amount you would have to lay out to obtain an equivalent vehicle if you dispose of the damaged one. It is the decisive comparison figure for the question of whether a repair is economic. On a total loss settlement it is the amount you are reimbursed, because you still hold the salvage value in the form of the vehicle.
Whether these figures are compared gross or net depends on your tax position. Private individuals compare gross, businesses entitled to deduct input tax compare net. Under § 249 (2) sentence 2 BGB (German civil code) VAT is only reimbursed so far as it has actually been incurred. If you settle without repairing and without buying a replacement, you receive the net amount; if you later do buy a replacement vehicle and VAT arises, you can claim it afterwards up to the amount actually incurred.
A technical total loss concerns whether the vehicle can be repaired at all. An economic total loss concerns whether a repair pays. The two rarely coincide: most vehicles settled as a total loss could perfectly well be repaired technically, it simply is not worth it.
| Feature | Technical total loss | Economic total loss |
|---|---|---|
| Essence | A repair is technically impossible or pointless | A repair would be possible but costs more than the replacement cost |
| Also called | A true total loss | A constructive total loss |
| Decisive test | Technical assessment of the vehicle structure and of repairability | Arithmetical comparison of repair costs and replacement cost |
| Typical situation | Destroyed load-bearing structure, fire, loss of the vehicle | An older vehicle with high repair costs and a low market value |
| Repair at the other side's expense | Not an option | An option where the conditions of the 130 percent case law are met |
| Usual settlement | Replacement cost | Replacement cost, unless settlement on a repair basis is permitted |
The figures below are a freely chosen worked example with round amounts. They serve solely to make the calculation visible and say nothing about any particular vehicle type or any particular loss. What governs is always the figures the appraiser determines for your vehicle.
| Example: starting figures | Amount |
|---|---|
| Replacement value per the appraisal report | € 12,000.00 |
| Salvage value per the appraisal report | € 3,000.00 |
| Replacement cost (€ 12,000.00 less € 3,000.00) | € 9,000.00 |
| 130 percent of the replacement value | € 15,600.00 |
| Market-based diminished value per the report (the same in every variant) | € 1,000.00 |
With these starting figures, everything else depends solely on the calculated repair costs. Three variants show the three possible settlement routes.
| Example variant | Repair costs | Repair costs and diminished value together | Settlement route |
|---|---|---|---|
| Variant 1 | € 6,000.00 | € 7,000.00 | Repair costs are below the replacement cost of € 9,000.00. An ordinary repairable loss. You can settle concretely or notionally; the diminished value is added. |
| Variant 2 | € 14,000.00 | € 15,000.00 | The sum stays below the limit of € 15,600.00. A repair at the other side's expense is possible, but only with a full repair per the report and six months' continued use. |
| Variant 3 | € 15,000.00 | € 16,000.00 | The limit of € 15,600.00 is exceeded. Only the replacement cost of € 9,000.00 is reimbursed. |
Variant 3 shows what this limit does in practice. Between variant 2 and variant 3 the calculation differs by only € 1,000.00. The payout differs by € 6,000.00, because in variant 3 the entire claim for repair costs falls away rather than being capped at the 130 percent line. Anyone who has the vehicle repaired anyway in that position bears the difference themselves.
On VAT in the example: in variant 2 the repair costs are reimbursed in the amount actually incurred, so for a private individual including the VAT shown on the workshop invoice. The market-based diminished value is treated separately from that. Since the Federal Court of Justice's decisions of 16 July 2024 it is to be calculated from the net sale price, regardless of whether the injured party is a business or a private individual.
Case law: BGH, judgments of 16 July 2024 – VI ZR 205/23 and VI ZR 188/22: market-based diminished value is always to be determined from the net sale price, because it is compensation under § 251 (1) BGB and not a service supplied for a fee.
The 130 percent rule allows you to have the damaged vehicle repaired even though, in economic terms, repair is the more expensive route. The thinking behind it is the interest in keeping what you have: a vehicle whose history, standard of care and reliability you know has a value to you that any replacement from the market does not readily match. The case law gives that interest considerable weight and accepts a premium of up to 30 percent on the replacement value for it.
What governs is the sum of the repair costs and the market-based diminished value. That sum must not exceed 130 percent of the replacement value. The limit is therefore measured against the full replacement value, not against the replacement cost, and the salvage value plays no part in this test.
Case law: BGH, judgment of 15 October 1991 – VI ZR 314/90, and BGH, judgment of 3 March 2009 – VI ZR 100/08: repair costs are recoverable even above the replacement value, as long as together with the market-based diminished value they do not exceed 130 percent of the replacement value.
The arithmetic alone is not enough. Three substantive conditions come on top, and in practice they lead to disputes more often than the limit itself.
First, the repair must be carried out fully and properly in accordance with the appraiser's report. A partial repair, a do-it-yourself repair without proof that it was done properly, or the omission of individual calculated items is not sufficient. Second, you must keep using the vehicle after the repair, for at least six months. Third, only accident-related damage may feed into the calculation; prior damage stays out of it.
It follows from these conditions that a notional settlement is ruled out in the 130 percent case. Anyone wanting to settle on a repair cost basis above the replacement cost must actually have the repair carried out and be able to prove it.
Six months from completion of the repair. That period is an indicator of the interest in keeping the vehicle and not a rigid cut-off. Nor does it stand in the way of payment: the insurer may not defer settlement on the argument that it must first wait for the six months to run. If, however, you dispose of the vehicle before then, the other side can revert the settlement to the replacement cost.
Careful: By judgment of 13 November 2007 – VI ZR 89/07 the Federal Court of Justice held that six months' continued use is required in the 130 percent case as well. The case concerned a VW Golf Cabriolet: repair costs of € 3,100.00 against a replacement value of € 3,000.00, sold four weeks after the repair. Only the replacement cost was reimbursed.
If the limit is exceeded, the claim for repair costs falls away entirely. There is no partial reimbursement up to the 130 percent line. What is then reimbursed is only the replacement cost, as in variant 3 of the example. Whether the limit is an absolute threshold in the individual case or a guide figure with some latitude is judged differently in the literature. So do not plan on coming in just under it; clarify before placing the repair order whether the calculation is safely within the limit.
A higher salvage value offer from the other side reduces your payout, because the salvage value is deducted from the replacement value. If the salvage value applied in the example rises from € 3,000.00 to € 4,500.00, the replacement cost falls from € 9,000.00 to € 7,500.00. That is precisely why injured parties often receive offers from national buyers shortly after reporting the loss.
What governs, however, is the regional market you operate in. You are in principle not obliged to use online salvage exchanges or national special markets, and you do not have to carry out market research of your own. You may rely on the figure determined by your appraiser, who usually establishes the salvage value from at least three offers on the regional market.
Case law: BGH, judgment of 7 December 2004 – VI ZR 119/04, and BGH, judgment of 1 June 2010 – VI ZR 316/09: what governs is the injured party's regional market; they need not be referred to special markets such as online salvage exchanges. Under OLG Stuttgart, judgment of 8 May 2025 – 24 U 1736/22, three offers on the regional market are sufficient.
A different standard applies to commercial vehicle dealers as injured parties; the Federal Court of Justice decided on this by judgment of 25 June 2019 – VI ZR 358/18. How far the regional market extends geographically has not been settled uniformly. Very different distance figures circulate, and no fixed limit in kilometres can be taken from the case law.
Careful: Do not sell the damaged vehicle before the appraisal report is available. A hasty sale below the salvage value determined later falls to your account, because the difference can no longer be reconstructed.
Yes. The damaged vehicle remains your property. Neither the other party's liability insurer nor a buyer it names has any claim to have you hand it over or sell it to a particular interested party. You decide whether to sell it, scrap it, have it repaired or keep driving it unrepaired, provided it is roadworthy.
That does not change the calculation: the salvage value is deducted even where you keep the vehicle, because it represents an asset that remains with you. In the example you therefore receive € 9,000.00 and additionally keep a vehicle with an assessed value of € 3,000.00. If you want to keep using it, have its roadworthiness checked and documented before driving on; and where only part of the damage is repaired, bear in mind that the route via the 130 percent rule is then not open to you.
No. The 130 percent rule comes from the law of damages and applies in the relationship with the party who caused the damage and their liability insurer. On comprehensive cover, by contrast, there is an insurance contract, and the scope of the benefit follows the general terms of motor insurance. Those typically cap the benefit at the replacement value less the salvage value. Anyone settling through their own comprehensive cover cannot therefore rely on the 130 percent case law and should consult the wording of their contract.
The replacement value is the price of an equivalent replacement vehicle on the regional market in its condition before the accident. The replacement cost is that value less the salvage value of the damaged vehicle. On a total loss settlement the replacement cost is paid out, because the salvage value remains with the injured party in the form of the vehicle.
An economic total loss exists where the repair costs exceed the replacement cost, so that obtaining a replacement would be cheaper than repairing. In such cases the vehicle is usually still repairable technically. Whether settlement on a repair basis is nevertheless permitted is decided by the 130 percent case law and its conditions.
At least six months from completion of the repair. The period counts as an indicator of the interest in keeping the vehicle and is not a rigid cut-off. It does not prevent payment; the insurer need not wait out the six months. Where the vehicle is sold earlier, the settlement can be reverted to the replacement cost.
In principle, no. What governs is the salvage value on the regional market accessible to the injured party, which the appraiser usually establishes from at least three offers. Under the case law of the Federal Court of Justice there is no duty to use online salvage exchanges or national special markets. A different standard applies to commercial vehicle dealers.
Then the claim for repair costs falls away entirely. The case law does not provide for a proportionate reimbursement up to 130 percent of the replacement value. Only the replacement cost is reimbursed. Anyone who has the repair carried out anyway bears the difference. The calculation should therefore be checked before the repair order is placed.
Under § 249 (2) sentence 2 BGB, VAT is only reimbursed so far as it has actually been incurred. Without a replacement purchase or a repair, settlement is on a net basis. If you later buy a replacement vehicle and VAT arises, you can claim it afterwards up to the amount actually incurred.
Yes. The damaged vehicle remains the injured party's property, and nobody can demand that it be handed over or sold to a particular buyer. The salvage value is nevertheless deducted from the replacement value in every case, because it represents an asset that remains. What is paid out is therefore the replacement cost.
This article reflects the position as at 3 August 2026 and is no substitute for legal advice in an individual case. Written by PKW Gutachter Service GmbH, automotive appraisal firm, Neu Wulmstorf, Germany.
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