2.5: CARFAX Reports: A Used Car Buyer’s Best Friend

Your first step when you’re looking at any used car model year 1981 or later is CARFAX. CARFAX is a repository of information about cars in North America gathered from, according to CARFAX, over 91,000 data sources. All you need is a 17 character VIN and a credit card and you have access to an awful lot of useful information about any car you’re thinking about, again, as long as it’s in the system. Fortunately you’ll be able to determine if your car is in their database before you need to pay anything. The CARFAX database does a reasonably good job of letting you know things like:

• If the car has been in an accident and has a salvage or rebuilt title;
• How many previous owners the car had and where that ownership was reported;
• If there are any recalls currently open against the car;
• How many service records they have for the car;
• Types of previous ownership, e.g., lease or personal vehicle.

In my experience often times there are gaps in the information CARFAX provides, but as a general starting point for deciding whether you even want to commit the time and energy it will take to buy a collectable car it’s great. Practically speaking, the real value of CARFAX is in the detailed records they provide. Here you can see when a car was bought or sold, where that transaction was recorded, when service was reported to a system in the CARFAX database and roughly what that service was, when any accidents were reported and a summary of the damage, information about the title status for the vehicle, information about the accumulation of mileage for the vehicle, and more.

Sample CARFAX report.

At the time I was writing this chapter a single CARFAX report cost $39.99 USD but if you bought multiple reports that price went down to as low as $16.67 per report. The reality of CARFAX is that if you’re part of any active car community … you can probably find someone who has a license for the service and can run a report for you for free. Not that I’m advocating for that, CARFAX is a great service and one that’s definitely saved me far more than the cost of a report multiple times, but it’s super common online to see folks asking “can someone run VIN XXXXXXXXXXXXXXXXX for me?”

The biggest complaint about CARFAX, and this is a perfectly valid complaint, is that the system is only as good as the data that is made available to it. The three major sources of data are state and province title agencies, law enforcement agencies, and repair and automotive shops. The first source, agencies, is believed to be reasonably accurate since that’s really what they do: keep track of the transfer of ownership for cars. The second source, law enforcement agencies, appears to be a function of the type of agency, the officer taking the accident report, and the type of accident with conventional wisdom believing that larger agencies and larger accidents are likely to make it into CARFAX but as things get smaller — local police departments in rural areas, small fender-benders, etc. — the quality of data reporting drops off. The quality of reporting comes down to individual officers; for example, CARFAX only knows that an airbag was deployed in an accident if the officer notes that in their report. Also, accidents are only reported to CARFAX if they are reported at all, so all of the little incidents where “party A” can convince “party B” to not report the accident and take care of it off the record … don’t get reported to law enforcement and thusly don’t get reported to CARFAX.

The biggest criticism about CARFAX isn’t agencies or law enforcement: it’s repair shops. There are an awful lot of different ways to make a repair or to maintain the mechanical integrity of a car, ranging from a large dealership all the way down to your buddy Sam doing the work in his garage. But repair and maintenance records only make it into CARFAX if the mechanic or shop adds them to the database accurately; the system can’t know what it isn’t told, and so it’s not uncommon at all for CARFAX to be missing information. To make this worse, even if a shop reports information to a CARFAX database, they aren’t obligated to provide any level of detail beyond “car was in for service” and the noted mileage. CARFAX sometimes has more information about work done or parts replaced, but that is unfortunately rare. And speaking of mileage, which is one of the things that CARFAX is actually moderately useful for, that data is being reported by human beings and so subject to error as well.

At this point you’re probably asking yourself “why would I even bother paying for a CARFAX report since they sound hugely inaccurate?” Good question, here’s why:

1. A well cared for car will have a history in CARFAX if it’s in the system, even if it’s not perfect. When you’re trying to buy a collectable car you’re looking for a well cared for example. The best care will come from owners who use professional mechanics, who take care of any damage to their cars with reputable body shops, and who take annual and mileage-based service recommendations seriously. Even if all of that doesn’t make it into CARFAX, enough of it will that it will be obvious that the car was cared for;
2. Conversely, a car newer than 1981 with little or no CARFAX history, is suspicious at best. Unless the car is brand new, in which case it will likely be under warranty, if you come across an older car that has a CARFAX report that has little more than transfer of ownership data, consider it suspicious. Especially for cars ten years or older, the chances that the car didn’t make it to at least one shop for one oil change, annual service, or repair that was summarily reported is low at best. Yes, the report may be missing some entries, but in my experience it’s rare that it would be missing everything … unless there is nothing to miss;
3. Look for a consistent reporting of title renewals and service history. You probably aren’t going to see oil changes every 3,000 to 5,000 miles in CARFAX, but for the best cared for cars you should see maintenance over time that is consistent with a driven car, especially as they age. After the odometer turns over 50,000 miles or so you would expect to see more frequent entries for service, often times listing more parts that were replaced if the car has that level of detail. Also, with older cars look for evidence of milestone services, often at 40,000 or 50,000 miles, that will be a substantially more complete service that replaces filters, changes oil, checks transmission, etc. This information may not be in the CARFAX, but if it’s not there and not in the provided service records you’re best off assuming it hasn’t been done;
4. Look for lots of entries just after the car was put into service or just following a transfer of ownership. It’s not uncommon for cars to have small issues when they are sold new; paint problems, electrical gremlins, and so on that end up being an annoyance to the buyer but that should be handled under warranty and thusly should have good documentation in CARFAX. None of these worry me as a buyer, personally, unless they persist across the history of the car, which indicates that they weren’t resolved correctly the first time.
   
   Similarly if there is lots of evidence of work done after a transfer of ownership that typically means the new owner was resolved to clean up whatever mess the seller made, but again you’d like to see those reports disappear quickly. Persistence of issues in CARFAX increases the likelihood of a problem that you’re going to deal with if you buy the car, even if the seller swears the problem has been taken care of. At a minimum it’s something you want your mechanic to call out in detail during the pre-purchase inspection and that you’ll want to research on your own;
5. Suffice to say, if the car has any title issues, buyer beware. Salvage titles, rebuilt titles, bonded titles, dismantled or junk … there are a handful of title “brands” other than “clear” that mean you’re looking at a car with issues. The most common I have come across are “salvage” and “odometer rollback” which are what they sound like, the former being a car that has been in a pretty extensive accident but repaired to be drivable, and the latter being a car that has been found to have it’s odometer tampered with. Odometer tampering is unfortunately common given that for collector cars a lot of their value is attributed to being low mileage cars.
   
   Odometer issues may also show up off of the title but via CARFAX. For example, if CARFAX reports a “most recently reported” mileage for a car and has a pretty clear history of mileage being reported … but the seller is representing a different or lower mileage than CARFAX, you have a problem. In those cases, unless the seller has a really good explanation, you are better off walking away, and even if their explanation is really good, keep in mind that when you go to sell the car you are going to have to find a buyer who will also accept that explanation. There are instances where it makes sense — non-U.S. cars that were originally reporting kilometers but where they had been converted to miles is the most common case — but in general if someone isn’t being honest with you about mileage they aren’t being honest with you about other things and it’s time to walk away;
6. Watch for frequent changes in ownership. If a car has a lot of owners, unless it’s a really old car in which case it won’t be in CARFAX anyway, that is a red flag for me personally. It may be nothing more than a handful of buyers who turned out to not love the car as much as they thought, but it could just as easily be a handful of buyers who realized after their purchase that there was something substantially wrong with the car and decided to dump the car rather than deal with the issue — more or less the game of “hot potato” in which you don’t want to be the one holding the burning spud.
   
   Anecdotally this can be hard advice to take: during the writing of this chapter I was looking for a reasonable mile Porsche 993 Turbo, the last great air-cooled turbo. They are out there but it’s rare to find one in the Pacific Northwest that is in “drivers” condition — slightly higher miles but still a well cared for car. I found one that met my requirements perfectly in that it was being sold by a Porsche dealership, it had around 70,000 miles, the front end had been wrapped in clear film to protect the paint, good color and good looking interior, reasonably priced … but it had seven previous owners. Porsche 993 Turbo are very collectable cars, and so the fact that each owner had only kept the car for 3.5 years on average before selling was definitely suspicious, at least to me. Especially since the last few owners only held the car for two years each, and the last owner had paid for the 40,000 mile service when the car’s odometer showed 68,927, the CARFAX report just looked wrong somehow and so I decided to pass on the purchase;
7. Watch for emissions test failures. One of the other things that CARFAX is pretty good at reporting is emission testing. Long-story-short most major cities require your vehicle to be able to pass an emissions test in order to register a vehicle. CARFAX will indicate whether the car you’re looking at recently passed or failed that test, and if the car you’re looking at has a history of failing the test and you live in an area that requires emissions testing, you are probably better off passing on the car. It’s not to say that you can’t bring the car into compliance, you may be able to, but it’s certainly going to be work and the history of failure will make it that much more difficult to sell when it’s time.
   
   Conversely, if you live in an area that doesn’t require emissions testing, and you plan on holding onto the car for awhile, you may be able to use failed tests as a way to negotiate a discount. The seller will either need to sell it to someone who didn’t bother to get a CARFAX, someone like you who doesn’t need to get an emissions test, or to you … and you’re the person standing in front of him or her with your checkbook open. All of that said, if you’re not 100% sure about emissions requirements for wherever you plan to register the car, make sure to ask a mechanic you trust or your local DMV in advance of any negotiation. There is nothing worse than buying a car and not being able to get it registered easily because it won’t pass a smog test;
8. Think about where the car has lived all it’s life. I have a personal bias: I don’t like buying cars that have spent a lot of time on the East Coast and especially not in Florida. These are my own bias and they may not be warranted, but the Eastern seaboard of North America, despite being so many wonderful things, is not a great place to own a collectable car for long unless you’re very careful. Moisture leads to rust, high humidity leads to interior issues, salted roads leads to corrosion, flooding is more likely in the East and South, etc. None of these are anything you particularly want to deal with, and you just don’t know how the car has been protected from the elements if it’s lived in a particularly humid, snowy, or wet area. It’s not to say that the car you’re looking at will be poorly cared for if it is from the East Coast, far from it, but if I’m looking at two cars, one from California and the other from New Jersey, I’m going with the California car every time.
   
   Now before every single person from South Florida to the tip of Maine emails me angry missives about how I’m wrong and how he or she take amazing care of their cars, yes, a good and thoughtful car owner will take care of a car regardless of where they live. I have no doubt there are lots of cars from Florida that didn’t sit out in the hot sun, day in and day out, exposed to blowing sand and subject to what Floridian’s call “some humidity” but a Pacific Northwesterner like me calls “death by vapor” … but it will be nearly impossible to confirm or deny how a car from Florida has been cared for, and I can assure you, every car on the East Coast has been “stored in a humidity and temperature controlled garage since the day it rolled off the line” if you believe their sales descriptions.
   
   You won’t be able to avoid cars from wet, cold, or humid locales, but when you see them make note and take extra care during your inspection. Heat and humidity make headliners fall and dashes separate, cold leads to salt on the roads which leads to rust and corrosion underneath, excessive weather speeds the need to replace gaskets and seals and hoses, and if that hasn’t been done by the seller it will be on you. One thing to consider is that a car from the East that has been subsequently purchased by a West or Southwestern owner has likely had many of the issues that can creep up addressed and so it may be less of a problem;
9. CARFAX knows if cars have been leased. Car leases are typically very structured in terms of maintenance and care, and are also fairly well inspected upon return to make sure the lessee held up their end of the lease contract. Because leases dictate annual mileage limits — requiring lessee’s to pay for any overages, leased vehicles are as likely as not to have “lower than expected” mileage, although few collectable cars are driven the expected 15,000 miles per year. With a solid inspection or provided warranty, previously leased cars can sometimes be had for a great price and be bought from the dealer who originally sold and has maintained the car.
   
   That said, some people treat leased cars like rental cars and drive them with reckless abandon. You can definitely drive a car hard, pushing to with every shift, getting hard on the brakes, and generally treating the car poorly and still be within the requirements of a lease. If the lessee is clever they will be able to hide the evidence of hard driving, or even if they can’t, that information won’t be easily passed along via CARFAX or any accessible format to the buyer. The same can be said for cars that have come out of rental fleets — not the typical source of collectable cars but also not unheard of — and these cars are better to avoid if you can.
   
   And therein lies the rub with leased vehicles, you really don’t know. You may get lucky and get a great deal, but you may get unlucky and get a car that has been driven really hard; it’s a crapshoot. The only instance where I have even been tempted to buy a previously leased vehicle is where I knew the lessee personally and knew their driving habits — basically the little old lady who drove the car on Sunday to church and back. In that one instance I felt safe, but everywhere else, the CARFAX report led me to look elsewhere;
10. CARFAX can help you make sure your seller is on the up-and-up. Especially if you’re buying from a private seller, have a look at the CARFAX and ask them questions like “when did you buy the car and where did you get it” and “when was the last major service and where did you have it done?” If the information is in CARFAX and different than the answer they give you, that’s suspicious. It may be because the seller doesn’t remember, but it may be because they are misrepresenting the car or worse. CARFAX will also tell you who currently owns the vehicle, and if the report indicates a bank or dealership but the seller is saying they have a free and clear title, that’s a problem. I personally haven’t run into issues like this during my collecting, but it’s not impossible to imagine.

Keep in mind: you will be using CARFAX in conjunction with documentation provided by the seller and a pre-purchase inspection to make your final determination about any car you’d collect. Even if a CARFAX looks clean, you’re not done with your research, not by a long shot — but if the CARFAX looks wrong then you know, at a minimum, you’re going to be doing lots more homework on the car before you make any offer to purchase. Similarly, lots of collectable cars are older than 1981 models and don’t have a 17 digit VIN that will show up in CARFAX. In this case you’re really going to just have to rely on your pre-purchase inspection, a review of whatever documentation the seller can provide, a good test drive, and your instincts as a car collector.

Passed the CARFAX? Let’s Review the Car’s Documentation

So it should be clear that CARFAX isn’t perfect when it comes to assessing a car’s history and that you’re going to need more information, at least for older cars. The ideal situation is one where the car you’re thinking about buying has extensive documentation, although usually this means the seller has a manila envelope full of receipts and invoices that would need to be sorted through. Sometimes, though, you’ll get lucky and find a seller who has applied some level of organization to that history or, better, has a summary of the maintenance history that they have kept in addition to the original paperwork.

In the latter case you’re lucky since you can easily browse the car’s history to make sure it has had oil changes at least bi-annually and has otherwise been serviced with an eye towards the car’s longevity and health. The most common case, unfortunately, is the one where there is little documentation for the car other than what the seller has collected during their ownership. In this case you still want to browse the paperwork to make sure you’re seeing the records you’d expect — oil changes, possibly tire replacements, annual or biannual services from a reputable mechanic, etc. I am not sure I have met a car collector who didn’t keep their records so if the seller doesn’t have that information it’s worth exploring why they don’t. It could be because they didn’t keep the paperwork but could call their mechanic and get it, but it could be because they haven’t done any maintenance on the car or have done it all themselves. The former case is obviously a problem, at least if they have owned the car for long, and the latter case has potential to be a problem unless the owner is obviously a skilled mechanic.

The middle case — one where the seller has a big folder of invoices and receipts — happens from time to time, and what I have always done is browse the paperwork to scan for “big ticket” items. They’re easy to spot, usually, since it will be a longer invoice with a higher dollar amount at the bottom. If it’s okay with the seller I pull those invoices out to look at more closely and then continue to scan the documents for evidence of oil changes, new tires, and general smaller cost maintenance items that the best kept cars will have. Assuming those are present and have dates that occur at regular intervals, I go back to the “big ticket” items to understand what maintenance or repairs were done. This usually requires the seller’s input to put context around the work, but if an engine has been rebuilt or a transmission has been swapped in it’s worth knowing when and where that was done.

[FOLDER PHOTO FROM BMW 2002]

I will be honest, I have never passed on buying a car that looked good in CARFAX and passed an inspection because it didn’t have paperwork, but I certainly like to see it if it’s there. Especially in the world of collectable cars, a well-documented car is simply more valuable, especially if the documentation only tells the history of a well-kept car. Auctions will cite “documentation back to the original owner” and Bring a Trailer commonly presents photos of whatever paperwork is available for potential bidders to gaze upon. In reality, the real utility of documentation is to ensure the car has been cared for and, occasionally, to confirm that known issues have been addressed. To this end, if you know the car you’re looking at has a well-known issue — the IMS bearings on the Porsche 996, rod bearing failure on a handful of BMW performance engines, timing chain stretch on Mercedes M157 AMG engines, etc. — you want to see the receipts that show the problem has been at least examined if not addressed. Make sure to do some homework on common problems for the car you are looking at before you look at the car and documentation so you’re prepared on this front.

Next up? The test drive!