CarFax: NOT a crystal ball- How to buy a used vehicle

I buy and sell a lot of cars, trucks and equipment. I often hear people talking about CarFax reports, especially as a guide to buying a "new" used car. Generally most everyone I talk to believes that if a car has a clean CarFax, it is a good car.

This is not always the case. CarFax reports are a tool to be used to judge the story the seller is telling, they are not the answer to the story.

CarFax uses information gleaned from state Divisions of Motor Vehicles, insurance industry databases, dealership service records, etc. to generate a history of a car's life. The information is only as good as what is reported.

Let's consider the millions of vehicles that are owned by private individuals or especially corporations/fleets who are self-insured or only carry liability insurance. If that vehicle is sent to the junkyard by its owner (And not paid off, or "Total lossed" by an insurance carrier)it will still have a "clear" title. Many auto salvage yards also carry state-issued used motor vehicle dealers' licenses, which allows them to resell the car with a clean title like any other dealer could do. I have seen many cars which would have been "Totalled" by insurance which were sold privately and rebuilt with clean titles, and therefore a clean CarFax.

It is also possible that a car may be sold privately to a reseller who does not transfer the title into their name. This is called "Jumping" titles and is actually a form of tax fraud. It also does not leave a trace for CarFax to pick up in the databases, and it may look like a car hasn't had as many owners as it really has.

Also, an unscrupulous dealer may take a car in as trade or purchase that has high miles. They are supposed to report the accurate mileage when the title is transferred to the dealership. However, they have some time before they are required to do this, and some dealerships will tamper with the odometer, or replace the entire odometer with one from a low-mileage wrecked identical car, and then register that new, lower mileage on the title at the state motor vehicles title division.

For example:
Hannah Smith trades in her 1998 Toyota Corolla at XYZ Auto Sales. She bought the car used with 21,000 miles on the odometer, and this is on the title. Hannah drives a lot for her job as a pharmaceutical representative. Her car now has 143,000 miles on the odometer. After Hannah leaves the car, XYZ Auto Sales locates a wrecked 1998 Corolla with only 68,000 miles and buys the gauge cluster from the car, replacing the cluster in Hannah's old car. Since Hannah bought the car with 21,000 miles on it, and the dealership registers the title as having 68,000 miles on it, and CarFax won't catch that. Since the car was used for mostly freeway miles and Hannah took care of it, it would LOOK like a lower mileage car. Once the car is dealership-detailed it would be very hard for a buyer to discover this fraud ever happened. XYZ Auto Sales just added $thousands to the value of this car for the price of a $50 instrument cluster.

How can you protect yourself from this sort of fraud?

First, look at the entire car and the entire story. Examine gemonly replaced items. If the car is only 4 years old and only has 30,000 miles on it, should it have four new tires, a new water pump and a new battery? Often, date codes from items like batteries and tires can tell the truth of when they were REALLY installed.

Second, original-equipment manufacturers label the car's parts at the factory. Fenders, hoods, doors, bumpers, all have stickers permanantly attached that have the car's serial number. Hoods also often have a sticker that lists the emissions control information, air-conditioner service information, or air-bag warnings. If you see those stickers are not there, odds are the car has had collision parts replaced. If you see dealership service parts decals, like "GM CERTIFIED REPLACEMENT", you also know it's had parts changed. Or worse, if you see a sticker listing "CAPA CERTIFIED PARTS", which is aftermarket replacement parts, you know it was repaired with non-factory parts.

Third, have a qualified mechanic inspect the car prior to purchase. The prospective buyer would pay for this. An honest seller would have no problem allowing a car to be inspected before sale- if they don't want to do this, find another car.
A good mechanic will charge $100 or so and spend about a half hour to an hour looking over the car. If possible, watch while the mechanic looks the car over and ask questions. Be aware that the mechanic may possibly know the seller and be alert for them working together.

Fourth, only buy from someone you would trust. Disreputable dealers and shady private sellers are out there. You can usually spot them by asking good questions. How long have you owned the car? Who did you by it from? Why are you selling it? What work has been done on it? Then confirm your answers with the paperwork. People who are taking good care of their cars keep paperwork. They have service receipts, owner's manuals, even window stickers. Don't believe the car just had a major service performed unless you can confirm it with the records. If the owner can't find oil-change receipts, service records to prove major servicing, or owner's manuals or spare keys, why are they lost?

Fifth, know what the model and year of car you are buying is actually worth with the options you want, and what those cars are being advertised for near you. Then when you see what you want, you can look at it objectively: Why is this dealer selling a 5-year-old Pontiac for $3500 under blue-book value? Are there a lot of similar cars on the market or on his lot? Or is it one he wants to get rid of? You have to figure that out.

There is no 100% guaranteed way to prevent buying a lemon. But if you do your homework and know what you are buying you can greatly reduce the odds of getting stuck with someone else's problems.

Good luck, and if this helped you, please mark it as a favorite.