Should You Trust Your CARFAX Report?

Checking a Carfax report has become such an ingrained part of the car-buying experience that many consumers assume that it's a definitive document that captures the complete history of a car. It's not.

Carfax is only as accurate as the information reported by its 76,000 sources. Which means that if an accident has yet to be reported to one of its sources, or if it never gets reported at all, it's not going to show up on the report.

It's easy to see how consumers could be confused.

The Carfax brand has become so accepted as an industry standard that some used-car sellers often provide a Carfax report as validation a car has not sustained prior damage. Yet in smaller print on its website and on its report, Carfax acknowledges its records may not contain an entire history on a car. On the same website, it advertises, "Get a detailed vehicle history report from our nationwide database within seconds."

Can consumers decipher the nuanced difference between a detailed report and a complete one?

Last week, ABC News profiled Oklahoma resident Danny Chaney, 54, whose 2012 Chevrolet Colorado broke down shortly after he drove it off a used dealer lot. An inspection revealed the car had sustained damage in a prior accident, one that never showed up on Chaney's Carfax report.

"I won't trust Carfax," Chaney tells the network. "And I will tell everyone I know, 'Don't trust Carfax.'"

Take a test drive

Carfax spokesperson Larry Gamache says Chaney should have taken the car to a mechanic before he bought it, not afterward, and more broadly, Carfax should be seen as one tool in the consumer's fact-finding arsenal, not the only one.

"Buyers of used cars have to take the necessary steps to reduce their chances of buying cars with hidden problems," he said. "It's beholden upon all of us to ask for a Carfax, take the vehicle to a trusted mechanic and take it on a test drive."

Carfax's catalog contains about 12 billion records culled from sources like police departments, motor vehicle departments and auctions, Gamache said. About 3.5 million records are added every day by a data-gathering team based at the company's Centreville, Va. headquarters.

(Note: Carfax is a partner of AOL Autos, providing vehicle history information on our car listings).

Car-history records companies like Carfax and its competitors, like AutoCheck and VINaudit operate much like consumer credit-reporting agencies, such as Experian and TransUnion, in that arrive at slightly different conclusions because they use different data sources. Each one offers a slightly different snapshot, but not a complete picture.

Salespeople may exacerbate confusion

As part of its reporting, ABC News visited Maxon, a Mazda and Hyundai dealership along Route 22 in Union, N.J., where two salespeople tried to sell undercover investigators an accident-riddled CX-7 that had clean Carfax reports.

"Yeah, the Carfax basically will tell you if the car's been in an accident," the sales manager said. "On our lot, we don't keep anything that's been in accidents."

Confronted by a reporter who revealed the car had been in a serious accident, a salesperson at Maxon blamed Carfax. "If I print out a Carfax, and that arrows are green, that means it's 100 percent," he said.

Why did the Carfax not show the accident? "You've got to take that up with the Fox himself," the salesperson said, referring to the "Car Fox", the company's advertising mascot.

A phone call from AOL Autos to the Maxon dealership went unreturned. From the video, it's unclear whether the salesperson intentionally misled the undercover reporter on the Carfax parameters or whether he really believed it was an accurate vehicle history.

Dealerships need to do a better job setting standards and educating salespeople to make sure they don't misrepresent the Carfax report in dealings with customers – but it can often be just as vexing for dealership employees.

"I have seen reports that dealers use when shopping online for used vehicles that show a clean vehicle history report at the time of purchase, but only to find out a week or two later – when the report is re-run by the dealer – it includes an updated vehicle history, such as damage from some type of accident," said Stu Zalud, director of dealer services for the National Automobile Dealers Association.

Bottom line: "Everyone believes vehicle history reports are the Holy Grail," Zalud said. "This is not the case."

So, what should car buyers do?

Shopping for a used car? Here are a couple tips on how you can minimize the chances of coming home with a lemon that has hidden damage.

- Follow the advice of Carfax itself. It's report is one tool in your decision-making process, not the only one.

- Do buy a Carfax report, or read over the free report provided by the seller. Either ask the seller to also provide a second report from a competitor such as Autocheck and VINaudit, or buy one yourself. You increase your chances of catching a problem with multiple reports.

- Take the car for a test drive. It's hard to believe anyone would buy a car without taking a jaunt down the road, but you're more likely to discover problems driving yourself.

- Always -- always, got it? -- have the car inspected by a mechanic of your choosing. Whether you are buying the car private party or from a reputable used-car dealership, this should be mandatory.

Pete Bigelow is an associate editor at AOL Autos. He can be reached via email at peter.bigelow@teamaol.com and followed @PeterCBigelow.