Most people think that cars offered through dealerships are a couple of thousand dollars more expensive than those offered by private parties (individuals). However, this is usually false. They may be a few hundred dollars more but there are some positive aspects of dealing with a car dealer, namely, the freedom to spend as much time as you want in inspecting a vehicle, getting free CARFAX reports (most dealers will pull one up for you if you request), having a variety of cars at a single location, and having accountability.
Most people think that cars offered through dealerships are a couple of thousand dollars more expensive than those offered by private parties (individuals). However, this is usually false. They may be a few hundred dollars more but there are some positive aspects of dealing with a car dealer, namely, the freedom to spend as much time as you want in inspecting a vehicle, getting free CARFAX reports (most dealers will pull one up for you if you request), having a variety of cars at a single location, and having accountability.
That “accountability” part might be surprising for some people, but I do assign some weight to it. A car dealership can be easily sued if they fail to disclose structural damages to a vehicle; they have a lot of reputation to lose in such cases even in the case of “as-is” sales. *Generally*, established car dealerships, representing reputed car manufacturers, won’t deliberately try to sucker you into buying a lemon [you can imagine the kind of attention a dealer will generate if he sells me a damaged Toyota vehicle that still has factory warranty on it - without disclosing the damage]. Plus, dealerships also offer the the “certified used” programs through which you can buy a vehicle with factory warranty.
On the other hand, almost all private party sales are considered as “as-is” and generally there will not be any written documentation involved. There is no incentive of “maintaining reputation” as in the case of an established dealer. Plus, there is no “higher authority” (for example a manager, or BBB, etc.) to lodge a complaint. Your only recourse in case a private party deal goes bad would be a small claims court - that too if you have ALL the proper documentation for your deal.
Some of that documentation that we provide is a Carfax Report, here is how to read one.
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“.
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”.
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.
A Clean CARFAX Report Does Not Mean A Clean Vehicle
It is important to have a shop (we check all of our cars through our service center) or mechanic check the vehicle prior to purchasing it.
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. 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 that the vehicle has been checked by a dealer or mechanic.
