Market Conditions Commentary
 
How much does a mark on Car Fax change the value of a car?
by Robert Hollenshead
Jan 31 2012 8:34PM
How much does a mark on Car Fax change the value of a car that is in play, being traded or sold? How much diminished value is there even for very minor things.  The answer is actually irrational.  In the vast majority of cases in the open market at the auction the affected unit becomes nearly sale-proof.  The reason is that nobody wants to knowingly get involved with having to justify the item that is negative on the report.  Therefore the desirability goes away and there is no activity on the auction block.

So imagine, you are sitting at a red light in your 2008 BMW 3 Series and someone taps you in the bumper from behind.  You jump out semi-shook up and the driver of the other car sees there is a scuff on your bumper and says they are sorry, they weren’t paying attention.  You do what you are supposed to do and ask to exchange information.  Meanwhile a policeman shows up and asks what happened, Checks your driver’s license and insurance information, takes your info, makes sure everybody is OK, and hands you a report.  No tickets, no damage to cars or drivers.  No sweat!  Off you go.  Right?  You might not even tell your spouse about it as who needs the grief, right?

Oh no daddy-o, are you wrong.  You got married, are having a kid and go to trade that baby nine months later on a Escalade(need more space).    The Cadillac dealer runs a TIM (smart cat)or checks the vehicle history report in the process of doing the appraisal and you are in for a shock.  Your BMW that should have been worth $21,700, is now worth $17,500.  And you are smart (but didn’t run it on Trade in marketplace, shame on you) and break in a full throated protest that,  “you tell that used car manager that you checked Kelley Blue Book and it said that based on my cars miles and equipment that it was worth many thousands more”.  The salesman takes that opportunity to inform you that “Kelley don’t buy no cars and you should try to sell it to the book”.  He says this with a self-satisfying smirk (at this moment you realize what a dope you were for not running a TIM guaranteed value prior to coming out shopping, but it isn’t your fault, you only do this every three years and you forgot you about the product that is in house).  You retaliate with the best accolades you can think of to forward the virtues of your sweat little BMW, “It’s never had paint work, I always serviced it, never smoked in it,  It’s Arctic White with cream interior and the salesman told me that would make it have a higher re-sale value.   And most important, it’s never been in an accident(?).

And now two years after the incident how to you get justice?  Who do you call?  It wasn’t your fault.  You never made an insurance claim…but your well-kept no paint work car, is worthless…because it has a mark on Car false Fax.  It can’t be sold certified.  A BMW dealer will not buy it, period.  When it goes to the auction to be sold, there is nobody in the lane to buy it.  Because of the Car Fax it has to be sold to a different level of buyer, highly price adjusted, in a secondary market where the buyer is less sophisticated and is a price buyer.

Your no paint work, no real accident BMW shows up on Car Fax as a car that was in a rear end collision.  Would you buy a used car that has a history report of being in a rear end collision.  Why would a dealer buy it at fair market value knowing he is going to get agita trying justify the fact that the unit has no paint work and really wasn’t in a rear end collision.

Just a quick true story that happened to me this Fall.  I was getting off the New Jersey Turnpike at the Meadowlands on the way to the Giants, Eagles game.  Traffic was horrific, stop, start.  I see it in the rear view mirror like it’s on TV.  This lady ain’t stopping.  “Everybody hold on,” I say, ”we’re going to get bumped”.  Bingo.  I jump out of the car.  Bumper is  pushed down a smidge.  Deck lid is fine.  I’m, hit $800.  The lady that hit me is out of her mind, “I’m sooooo sorry.  I was texting and didn’t see that you were stopped.  Oh my God my husband is going to go nuts.

I look at the lady, I look at my $70,000, 2012 Escalade ESV, special something Edition I brought home from the auction to bring my crew to the game.  I asked her if she was hurt.  She said no.  I told her, I got to go.  She said “don’t you want my information, it was all my stupid fault?”  I said no.  I got to go.  And I’m thinking to myself, if the cops come,  we swap info, and my insurance pays for the wreck, and they fix it good, I loss $20,000. How you ask?  Simple as pecan pie, Car Fax.  The unit becomes unsellable I’d rather fix the bumper correctly for $800 and not have the unit  smushed in value by a hit on Car False, I mean Fax. 

15 Readers' Comments

1
Paul Galletti
Williamsville
NY 14221
2 years ago
You couldnt be more correct. I have had that same dilemma. Cheaper and easier to pay for someone elses negligence than to tarnish a piece of MY QUALITY INVENTORY. Carfax is complete Bulls*!t. Its almost like having to explain to a customer that a car is salvage because of a triangle. If they want to report on vehicle history, they need greater detail and the FACTS (not the fax)!! Totally wrong that a "website" can label a car as having aids & send it to a leper colony. It's also equally wrong that some tacky piece of sh*t covered in paintwork & overspray that I wouldnt have dreamed of selling 8 years ago winds up on my lot because that same "website" says its "CLEAN". Sad to say that until the current state of affairs changes, we will all continue to pay the monthly extortion money for unlimited "FAX" (not FACTS).

2
Mike Fanto
Pittsburgh
PA 15238
2 years ago
Be careful, Manheim is now reporting to Carfax! I bought a 18.000 mile A6 with rocker damage sold uniboby, with a clean Carfax, cost to repair was 900bucks. A week later Carfax showed STRUCTURAL DAMAGE reported by auction MINUS $6,000.00 on Carfax. This perfect car is now unsellable. This is not right for manheim eather, we buy cars based on there discription and they then stab us in the back by giving out what is supposed to be secure information that should never leave there gates, part of the fees I pay sre for security. Manheim is in bed with Carfax! If you have same problem contact me @ mfanto@aol.com. RECHECK your unibody Carfaxes.

3
Robert Hollenshead
MANHEIM
PA 17545
2 years ago
Thanks Mike. If you heard the stories that pass through our office, you'd quit cars and out a Rita's water ice. I have one from today that goes back six years on a $70,000 Porsche. These Car Falses can go sideways at any moment and our assets are chopped in half while the middle men look the other way as if there's no sweat. There has to be an end to this or it won't work out.

4
Mike G
Great Neck
NY 11024
2 years ago
Rob- you're a straight shooter & I think I speak for all of us when I say thanks for the business you bring each week & for your business approach that helps us put food on the table. If more sellers were like you you wouldn't be the only lane selling over 90% & the auction would sell more than 26% of all cars on any given sale day.

Your words on carfax are spot on. Its a double-edged sword though. It devalues good cars all to often & hits us hard in the pockets if we're not careful. On the flip side though, you know as well as I do that we all use it to our advantage whenever we can to make us money. When you and your buyers buy off private sellers, dealerships, & all your other resources & when I and all us dealers take trade-ins & buy off private sellers, you KNOW the first thing we all do, often before even inspecting the car, is run that miserable carfax. It hurts us all too often if we're not careful, but on the other hand when we see these bad carfaxes you KNOW we steal t

5
Mike G
Great Neck
NY 11024
2 years ago
we steal their cars at a price we can make $$ on even with the bad info reported.

MISinformation effects all of us & how so much of this carfax bs is nothing more just that. MISinformation. All the good cars that have been bumped causing no damage but now have "rear impact with another vehicle" get de-valued & even worse, these reports show no difference in whats reported from this & a car that was actually smashed. No matter how many cars I see, it still drives me wild to see how many cars that roll into the auction block & our lots with a "clean" carfax but look like theyve been smashed from every angle, put back together with crazy glue, painted in someone's backyard in Mexico with a spray can, but pull good $$ because nothing was reported & when repaired correctly some idiot who uses Carfax as the holy grail will see a "clean" carfax & pay top dollar for that piece of sh*t. Its sickening.

Keep up the good work Rob... Its much appreciated

6
Yakov Bandura
Syracuse
NY 13206
2 years ago
Hi Everyone,

Carfax is a messed up thing, but there is a market for cars with Bad Carfax. (Atleast one positive thing about it). I buy cars with messed up Carfax, but gotta steal it at right price, which I do in Bob's lane every Friday. Bob will sell you anything you want to buy. That's what we all love about him, he might make $$$ but the guy he sells it to, will make a good profit if he pays attention. My approach to a retail customer that's looking at a car with bad carfax is: I tell the customer that we will take the car to a new car store and have it fully inspected by them to see what was hit and replaced, another thing I do is: as long as they own the vehicle if any paint defects come up like pealing clear coat or paint falling off, I will guarantee the repairs. So far out of 1000 cars sold in the last 2 years, I had to do it once and that was repaint 3 panels. It may seem stupid, but it gives little bit more confidence for the consumer and they pull the trigger. I think Bob sh

7
Yakov Bandura
Syracuse
NY 13206
2 years ago
I think Bob should write up a little article about how to sell cars with a bad carfax if you have any on the lot and how to approach a customer about it. Most cars with bad carfax are great cars, sometimes you'll get some BS, but do your homework before buying.

Bob, if you can give out some advice about: How to sell cars with a bad carfax and approach a customer that wants to buy a car that has a bad carfax, that would be great. I will see via Simulcast tomorrow. Have fun. Sell them all!!!

8
Cris Mich
Hickory
NC 28602
2 years ago
Ok, so we pretty much established that we all hate Carfax for whatever reason...(or at least I do)
1. For potentially misleading info
2. For killing the value on an otherwise potentially great car
3. For making all dealers look like clowns
4. For charging too much for their product
5. For brain washing customers into thinking the Carfax is more important than the actual history of the car...

For me, more than anything, I could deal with them if they weren't strong arming me into paying their rediculous price for potentially misleading information. How are you supposed to deal with this problem/scenario?
I think in this case, as well as all others, Knowledge is Power... At least from a negotiating standpoint.

9
Cris Mich
Hickory
NC 28602
2 years ago
I understand their whole objective - make money and charge as much as you can get away with charging...
Ive noticed a trend in business advertising lately - in order for companies to change the public perception - it might be one of the worst companies regarding customer support, but they pay a lot of money to advertize that they have the best customer support; or they could be the highest priced product, but they advertize like crazy that they are the Lowest Price and they can save you money... Most people are too lazy to do their homework and they bank on that!

In this particular case, Carfaxes pricing is what makes me more aggravated than anything.
I was paying $779 for unlimited carfax with roughly 30-50 cars, other dealers are paying $399 for unlimited carfax with around the same inventory. According to them, their prices are set across the board.

Of course if you bring this up to them, you're a sack of Sh*t lair because you're getting a great deal and other people ar

10
Cris Mich
Hickory
NC 28602
2 years ago
CONTINUED: people are paying more (which is true - a friend in Charlotte, NC is paying $1100 for the same product). But my concern is, why would you have to pay so much for an incomplete product? Don't act like your product is "The Sh*t" because the people that pay your bills are also the ones that hate you, not to mention the fact that They Know The Truth!

So everything is out on the table. We have established the problem and keep beating ourselves up about it, but what do you actually DO about it? I know what I did - My contract came up for renewal and I told them the same thing I always tell them - the same thing they keep ignoring everytime I tell them - Dealers aren't happy with your advertising, they're not happy with your price, they're not happy with your information, and they're definitely not happy about how you think you can determine how much more or less a car is worth especially considering there is nothing substantial to help you determine that value.

11
Cris Mich
Hickory
NC 28602
2 years ago
So I cancelled. I guess its time to stop talking about it and start doing it. I think that goes for every other dealer - You can keep threatening them with cancelling but if they got you by the balls and you don't do anything about it, they're just going to squeeze harder and harder. My carfax started at around $500/mo ballpark a month and I had enough of their crap at around $800/mo.

Everyone hates them but you don't want to be the only one getting rid of them. All we need is a medium... a way to unite all the dealers against a common cause...

Stop being the skinny wimp that talks crap and can't back it up. They will call you out and they'll know right away that you're a wimp; they can charge you double what you're paying now, and you'll still bend over and take it, because you've already proved to them that they can...

12
Barry Wolf
CHERRY HILL
NJ 08003
2 years ago
Bob, I'm a bit late on the post, but you are right on for this subject. I won’t make this too long. CFax needs to have someone in place that might know a little about the Car Business and make the call what goes on the report and what doesn’t. Maybe a $$ amount when reached should be listed...like any repairs that are estimated over $5,000 should be and the ones (as you described) that are under a said amount are not. But that may require CFax to go to another level. Wonder what would happen if 50% of franchise Dealers would cancel their account and a sales rep would call and ask why....maybe CFax would listen to their customers??
This may be forwarded to "feedback" on the CFax website. Is there one?

13
Robert Hollenshead
MANHEIM
PA 17545
2 years ago
good to hear from you Barry. Thanks for you contribution.

14
Frank Curcio
Gainesville
FL 32609-2372
2 years ago
Bob, You wrote in past articles you had a bomb to drop on the Carfax machine. Still waiting on pins and needles ....

While were waiting, careful dumping on the cops. There are plenty more cases where the idiot driving the S63-AMG gets a ding from driver number two, calls the cops, and Demands a police report over many objections from the cop, who, believe me, doesn't want to write the crash report to begin with. I feel nothing for the idiot owner of the high end car who suffers diminished value on the trade in, but I feel the pain for the wholesaler who ends up with it, especially when it is purchased without looking at the VIN history, we all know we have done this.

And did, someone just write adverse info about Manheim ? Carefule, Manheim will buy Bob's web domain and delete it.

15
Robert Hollenshead
MANHEIM
PA 17545
2 years ago
Frank,

You are right as the owner is not aware of the fact that that report will crush his butt and won't know it until two years from now when he is trying to trade that hamburger. It's not the Cops fault. And as for Manheim, I am their largest and most loyal customer in the country. I can't control what guys say and I think it is good for them to know how dealers feel. Hiding the sun with your thumb helps nobody.