CARFAX: Know Its Limits (Auto Fraud Week)

CARFAX ads make me want to scream. CARFAX will not give you the “real history” of a car. What a CARFAX report gives you is the reported history. There can be a big difference between the reported history and the actual history of a car. CARFAX just collects information reported to the various states’ motor vehicle departments. But each state has its own standard as to what information it collects and what that information means. Also, the manner in which accident information is recorded—if at all—varies widely.

For instance, in Minnesota, a salvage vehicle is defined as a vehicle that has suffered damage in excess of 70% of its pre-damage value, not including the cost of replacing the airbags. However, a lot of the newer cars sold here come from California, where a salvage vehicle is one damaged to such an extent that the owner considers it uneconomical to repair.

So, in California, a vehicle can suffer a lot of damage without being declared salvage. and because a damaged car with a clean title is more valuable than a damaged car with a salvage title, California cars often do not get declared salvage. Instead, they are sold to rebuilders who patch up the cars and sell them at auction with clean titles.

There are other ways to wash a title, as well. If cars were never reported as salvage, CARFAX probably will not catch them, unless it happens to catch an accident report indicating major damage.

What does this mean? It means a CARFAX report may not show the real history of a car, because CARFAX misses a lot. CARFAX reports are useful, especially for catching odometer-reporting problems and—sometimes—lemon return issues. But it is important to understand what those reports are actually showing you.

I have a case right now in which my client bought a newer used car. It turned out to have been heavily damaged and repaired in California. After locating the car he wanted online, where it was advertised as “clean”, he went to the dealer looked it over. The dealer’s window sticker stated that the car had been “reconditioned to the highest standard.” The car looked clean, and the CARFAX report did not show anything.

Within a week, the car started to have issues, such as the horn not working. He took it to a dealer to have it fixed, and the dealer found that the car had been in a significant accident. It was bad enough that the airbags probably deployed. The accident had to have caused significant damage, because the frame was bent. Also, some of the repairs were done with parts from a completely different make and model of car.

In these tight times, more and more people are trying to be smart shoppers and save money at the same time. Buying a car is always tough, because the car sales industry has been perfecting the art of scamming you out of your money since cars replaced horses. So what can you do to protect yourself? Verify! Verify! Verify!

While CARFAX reports are helpful, they are only as good as the information they are able to obtain.

The best thing you can do to protect yourself is to take any used car you are thinking of buying to a good mechanic and have them look it over. Stop by a body shop, too, where any body shop owner with more than a couple years’ experience can spot a rebuild from 20 feet.

The extra couple of bucks you might spend are well worth the peace of mind.