When going to buy a used car from either an individual or a dealership, there is always a little concern over whether the car will be reliable or a “lemon.” CARFAX started a reporting system for cars based on their vehicle identification numbers (VIN), to help provide an unbiased resource for used-car buyers.

CARFAX provides a list on their website, carfaxonline.com, of the material that might be included in each report:

• Title information, including salvaged or junked titles
• Flood damage history
• Total loss accident history
• Odometer readings
• Lemon history
• Number of owners
• Accident indicators, such as airbag deployments
• State emissions inspection results
• Service records
• Vehicle use (taxi, rental, lease, etc.)

This information becomes available from accident reports (police and fire departments), insurance companies, and maintenance mechanics. While CARFAX relies on the fact that they have been around the longest and have the most extensive database, it is still impossible to have everything. Even CARFAX tries to acknowledge this with their Buyback Guarantee, “If the CARFAX Report fails to include a DMV-issued branded title (such as salvage, fire or flood damage, and odometer problems), CARFAX may buy the vehicle back for the full purchase price.” This guarantee does have its share of fine print, such as not covering cars branded within certain time limits before the report was issued.

Generally, used car dealerships provide CARFAX reports as a statement of good-faith to their customers. Car insurance companies, such as USAA and Liberty Mutual, provide a 20% discount off the price of obtaining the report. The quality of the information is regarded as a good tool to have from an unbiased source when buying a used vehicle.

Edmunds.com, a popular car site for new and used cars, advocates a report in conjunction with other steps in buying a used car. Regarding CARFAX, they note that they are often seen as the industry standard. “What distinguishes CARFAX from the competition is not just the data it provides, but the way it is organized and interpreted.” They go on to highlight that CARFAX helps the reader interpret the findings such as something being a possible human error rather than a car defect, and recommending a review by a certified mechanic. Whether it is CARFAX, or another vehicle history reporting agency, Edmunds.com recommends continuing to complete an assessment of a used car before purchase. Take the prospective vehicle to a certified mechanic, and complete a test drive.

Similar to Edmunds.com, Consumer Reports recognizes CARFAX as one of several safety measures when buying a new car. They do appreciate CARFAX reports for what they might be able to find; notably odometer fraud or past fire, flood, or crash damage. However, no report is perfect and consumers would be wise to not rely on it solely for their purchase.

CARFAX is a tool that is best used to determine if there are major problems in a used car’s history. While a worthwhile step for a low fee, it should not be the sole piece of information used in buying a used car.