Used Car Buying Tips - Part 2: Understanding Vehicle History Reports

Today, let us assume that you are through with yesterday’s classic confusions and have come to a decision regarding the amount of money you can afford and the type of car you want. The next thing to do is to start looking for cars, and pull up the vehicle history records for the ones you like.

Here are some websites where you can start your used car search:

• AutoTrader.com (gives you a list of used vehicles at all the dealer locations around a given zip code)
• Cars.com (listings from dealers as well as from private sellers)
• Ebay Motors
• Your local Craigslist
• Your local newspaper classifieds
• If you are looking for a *certified used vehicle*, most manufacturers have some kind of a national database of such vehicles (for example, Honda and Toyota certified used databases). Be sure to check these out - sometimes they list cars that do not appear on any of the other websites mentioned above.

Once you have successfully searched for the car you want, it’s time to pull up it’s history to check if it has been through any “bad times“. Currently, in US, there are two websites that offer vehicle history reports for consumers:

1. CARFAX ($24.99 for a single report or $29.99 for unlimited reports over a period of 30 days)
2. Autocheck (provided by Experian Automotive - a part of Experian - the guys who compile your credit history; $19.99 for single report or $24.99 over a 60 day period)

Information from these two reports is similar, but not exactly same. For example, for the 2005 Toyota Corolla we bought, CARFAX shows 4 records listing various events whereas Autocheck shows 6 records and some additional data. Although essentially the same information was present in both the reports, it was obvious (from the details) that the reports were pulled up from different sources.

For the purpose of this post, let’s discuss the more popular CARFAX vehicle history report. Most arguments could be easily extended to the Autocheck vehicle history reports also.

What Does A CARFAX Report Tell You

According to it’s website, a vehicle history report can carry information on the following:

• Title information, including salvaged or junked titles
• Flood damage history
• Total loss accident history
• Odometer readings
• Lemon history
• State emissions inspection results
• Number of owners
• Service records
• Lien activity, and/or
• Vehicle use (taxi, rental, lease, etc.)

If there are discrepancies in the things listed above, there are clearly marked in every vehicle history record so you don’t really have to do any “guess work”. Click here to see an example vehicle history report of a damaged vehicle. Problem areas are marked in red and bold (in a movie-style user-friendliness).

Since vehicle records are arranged by date and the odometer readings are chronologically displayed, odometer discrepancies are easy to figure out. However, issues with title information, lemon history, flood damage will only appear if someone has reported these issues to CARFAX (read the section titled “A Clean CARFAX Report Does Not Mean A Clean Vehicle” below). The report also tells how many people owned the car after it hit the road for the first time. Too many owners (2+) probably means inconsistent handling history - something which you should avoid. For the same reason, you should avoid vehicles marked as rental. Leased vehicles are fine - as long as they don’t show too many miles/year. According to Cars.com:

People who lease are charged for all necessary repairs. This policy encourages people who lease vehicles to take care of them.

By the way, lack of “service records” on a CARFAX report does not necessarily mean that the vehicle was not maintained properly. There is always a possibility that the servicing was done by a shop that does not report data to CARFAX.

At times you can even read more into a “clean” CARFAX report. Here is an excerpt from one such clean report for a certified used Honda Civic that we actually test drove last week:

Hmm .. “vehicle reported stolen” .. that too in Louisiana (think abandoned vehicles in swamps). That sort of breaks your trust. There was no way we could have bought that vehicle in spite of it’s clean CARFAX record.

We spent about an hour examining the vehicle ourselves, and from things we could observe, there was some evidence of water damage to the interiors (we compared the carpet and the upholstery to other Honda Civics and it was obvious that this one had some problems). We brought this to the notice of the salesperson who was trying to give us a *good* deal on that particular car - and he just shrugged it off with “Don’t worry, it’s a certified vehicle“. We waved him goodbye within a few minutes after that.

A Clean CARFAX Report Does Not Mean A Clean Vehicle

I have met plenty of students in my town who have bought cars after checking up a CARFAX report - which appeared to be clean. They did not opt for a detailed mechanical inspection because of the *clean* vehicle history. This is not a very wise thing to do for the following reasons.

Somewhere on it’s website, CARFAX says this:

CARFAX compiles the CARFAX Vehicle History Report from information it receives from thousands of sources. As extensive as our database is there are still accidents that are not reported to CARFAX.

You should keep in mind that all accidents are not reported to a DMV (or other sources from which CARFAX gets it’s data). Accidents that are reported usually follow the *normal* course of actions, which includes: filing a police report and/or reporting it to an insurance company for the purpose of claims and/or having the vehicle repaired at a service center that reports data to CARFAX. However, a number of times, this normal course of actions is not followed and as a result the information does not appear on any official records and hence does not appear on the CARFAX report.

Similarly, not all repairs are reported to CARFAX (generally happens when repairs are done at an arbitrary, cheap body shop instead of a dealer-associated body shop) and hence do not appear on the CARFAX report.

A classic situation that we see often in our university town is a good example of how certain events/accidents never make it to the CARFAX report. Most students usually look for lower insurance premiums and end up with policies with high deductibles. When such students get into accidents, they usually try to settle the matter without involving the police (so there is no police report). Then, they take their cars to some cheap repair shops in town, pay for the costs of repairs from their own pockets rather use their insurance (this happens due to high deductibles and also because they don’t want their premiums to rise due to insurance claims - as it is, premiums are very high for unmarried males under age 25).

In such situations, the damaged cars are back on the road within a week and there is absolutely no record of the accidents at all. CARFAX reports for such cars are absolutely clean, although the cars may have suffered cumulative damages worth thousands of dollars over the years.

The Meaning of CARFAX Buyback Warranty

CARFAX offers a buyback warranty on certain eligible vehicles. Here are a couple of important clauses in it’s warranty coverage.

• Upon finding no severe problems (major accidents, fire, flood damage, odometer problems or lemon history) were reported by a DMV, the vehicle automatically qualifies for the Buyback Guarantee.
• If you later discover that a severe problem was reported by a DMV and not included in the Vehicle History Report, CARFAX will buy the vehicle back.

Don’t let this warranty clause fool you into blindly buying a vehicle that appears clean on CARFAX. The keywords in this warranty clause are again “… reported by DMV …”. The warranty simply gives you an assurance that all the information available through government agencies has been included in the CARFAX report. If you later find out that your driver-side door was replaced after a side-impact accident, which was never officially reported anywhere, that warranty is of no use to you.

The only time you can avail the buyback warranty is when an accident has been reported by a DMV and, in spite of that accident record, the CARFAX report for that particular car comes out to be clean (accident-free).

What Should You Do Before Buying A Used Vehicle

Even if the CARFAX report is clean, always make sure you get your vehicle checked thoroughly by an independent mechanic. If the dealer/seller will not allow you to take the vehicle to your mechanic - do your own inspection (if you are confident enough) or just let the deal pass, you will certainly find others who will allow you to do so.

In fact if you read the information on CARFAX website carefully, you will notice that they acknowledge this:

While we’ll never know everything about a particular car, a CARFAX Vehicle History Report combined with a test drive and an inspection by a qualified mechanic is a consumer’s best protection when buying a used car.

Now, thorough vehicle checkups don’t come cheap (usually between $45 ~ $90 per vehicle depending on where you have the vehicle checked), so make sure you get only *worthwhile* vehicles checked. I will define worthwhile vehicles as the ones which satisfy the following three conditions:

• It should have a clean CARFAX record.
• It should pass a cursory visual inspection that you should conduct yourself.
• It should pass a “test drive” run.

If there are problems with any one of these conditions, don’t waste your time and money in having that car inspected.

Tomorrow, we will discuss points #2 and #3 in detail - that is, how you can first visually inspect a vehicle with very minimal tools and how to test drive a vehicle before taking it for an expensive checkup.

Before you go, let me summarize this lengthy post in a few words - a vehicle history record and a thorough checkup by a good mechanic are complementary measures that you must implement before buying a used car; don’t skip one in favor of other.

As an aside, for Canadian citizens, CarProof.com runs a vehicle history report service in Canada, analogous to CARFAX in US.