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I was speaking with my coworker about general financial topics and the discussion came up of selling a car. He immediately became animated and started discussing CarFax.

Personally, I know CarFax as a service that helps prevent me from being scammed by a fraudulent car title or an unscrupulous seller. Maybe the car was wrecked, retitled in another state, or the mileage was changed. It is nearly impossible to know without CarFax, but there are warning signs to look for such as overspray from a repair job, uneven tire wear, rust around the edges, or a mildew smell from the air conditioning system.

My coworker changed my thoughts somewhat on CarFax because the information is a two way street. What if you are a seller and the information in CarFax is wrong? There is federal legislation confirming your rights in a credit report, but there is no legal recourse or even official course of action if you find an error in your car’s CarFax report.

A CarFax report can have a significant financial impact. If you were ready to purchase a car and CarFax said there was likely odometer fraud, it would certainly negatively impact the price you were willing to pay. Most people probably would not purchase the car.

My coworker decided to sell his car, so he bought a monthly CarFax license since he was also planning to buy a car at the same time. CarFax also encourages you to check your CarFax report before you sell your car since they know that their report is important in the buying process. Carfax uses this to work a sale on both sides of a transaction.

This is much like previous years when credit agencies would force you to purchase a credit report before you applied for a loan to find out what your credit report indicated. Then the bank would purchase your credit score to see if they should give you the loan. Fortunately for us,Congress acted and credit reports are now free. Based on my coworker’s experience, I think that you should also be able to pull one free CarFax report selling your car. They have the title data, so they could likely authenticate the owner similar ways as credit agencies.

So what exactly happened in my co-worker’s case…When my coworker checked his car VIN number on CarFax, it indicated possible odometer fraud. He knew immediately where the problem was. Several years ago, my coworker’s car was involved in a small accident. His wife asked the insurance adjuster to appraise the damage. The insurance company sent a third-party adjuster who stopped by to look at the car while she was at work.

She called to confirm if the adjuster had checked the car because she had not heard from the adjuster. The company confirmed that the damage had ben appraised. She specifically asked how the adjuster had captured the mileage since she was not available when the car was inspected and the car had a digital dashboard. She was told that the information had been captured correctly. Obviously the adjuster had not captured the information correctly. It was impossible without the keys. Additionally, the mileage was listed as 60,000 exactly when the car was around 40,000 miles.

Although, in many ways CarFax has assisted buyers by preventing them purchasing problem cars, there are also real, honest people who are trying to sell their car that need fair treatment. There are several problems with the CarFax system, including:

1. No free CarFax report before you sell your car to confirm that the information is correct
2. The only way to contact CarFax is via email if there is a problem with the report.
3. The person who reported the bad data has no liability or responsibility — the car owner must prove innocence.

The good news is that my coworker was able to clear up the issue. However, he was required to show both insurance forms and body shop receipts showing the millage at the time of the accident.According to this blogger, you are better off asking a good mechanic to check out a car before purchasing a used car.

The moral of the story is to keep good records on your car. It can potentially increase the sales price, by assuring potential buyers that you maintained your car. Those records might also be able to save you from a bad car fax report.

Technorati Tags: carfax, used car, automobile, for sale, data integrity, credit report, credit history, car history, errors

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