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Carfax: Friend or Foe?

August 2010, F&I and Showroom - Feature

by Gregory Arroyo - Also by this author

Bill Keefe doesn’t want to jinx it, but he believes his Mazda-Kia store in Amherst, N.Y., has cracked the code of the Internet shopper. In fact, his store has claimed record months leading up to July. A key reason for that is Carfax, the very company that many say has taken transparency too far.

“I love Carfax, but this new thing they have is nonsense,” says Keefe, used-car manager at Northtown Automotive Companies. “But as much as I hate that it’s on there — because I don’t think they are in the business to know what the heck the market’s doing on these cars — they chose to get in this game, so those are the rules I have to play with.”

The “new thing” is Carfax’s History Impact Tool, a price calculator the company describes as the “first-ever value guideline that shows how much more or less than the retail book value consumers would be willing to pay for a specific vehicle based on its history report.”

Answering via e-mail, Carfax officials say its new tool can also be used to the dealer’s advantage: “Dealers can input any of the current retail book values they use into the first box of the Price Calculator to help determine how those values are affected by the vehicle’s history and make their purchase decision accordingly.”

Jimmie Powell, general manager for Investment Automotive Group, an independent store in Centerville, Utah, first experienced Carfax’s new tool in July, when a customer in the market for a 2008 Toyota Sienna asked, “Well, Carfax said it should be worth $440 less. What are you guys going to do?”

His answer? “I just said that’s based on retail pricing, and we’re way below retail,” he recalls.

As for where that $440 price subtraction came from, he says: “I have no idea. It did have a clean report, so the only thing I could figure was that it had two owners.”

Powell is puzzled by Carfax’s tool, but he knows all too well the company’s influence on car buyers. Coming off a record 80-unit month in March, his store replaced Carfax with a lower priced service. Sales plunged by more than 50 percent over the next two months. In June, he brought back Carfax and sales picked up again.

“I think the Carfax name is something people are looking for,” he says.

A Two-Horse Race

Several vehicle history services have come and gone over the years, but Carfax and Experian Automotive have emerged as the two main players. Their mission statements are similar, but the two companies have taken divergent paths.

Carfax was founded in 1984 by Ewin Barnett, whose initial objective was to combat odometer fraud. The company has since grown its database from 10,000 records to eight billion today.

A major turning point in Carfax’s history occurred in 2000, a year after it became a wholly owned subsidiary of the 140-year-old R.L. Polk & Co. What the company did was launch a $20 million campaign to educate consumers about the risks of buying used cars, urging them to buy a Carfax report online or demand one from their dealer.

Carfax didn’t launch its dealer site until two years after it made itself available online to consumers. Today, the company lists Kelley Blue Book, Edmunds, MSN Autos, AutoTrader.com, Yahoo! Autos, and AutoMercado.com as its partners.

Experian Automotive entered the segment 10 years ago to serve the auction market. As Andy Sheehan, the company’s senior executive of product management and marketing, recalls, results of the company’s AutoCheck reports were announced as vehicles rolled through the auction lanes, notifying dealers of any title issues. Today, more than 90 percent of vehicles at auction are scanned by AutoCheck, which also is used by the NADA Used Car Guide, eBay Motors, JM&A Group, CarsDirect online, CarSoup, and Aspen Marketing Services.

“Our business has really grown through partnerships, first in the auction market and then extending to DMS (dealership management system) providers such as ADP and Reynolds and Reynolds,” says Sheehan. He points to Hurricane Katrina as a major driver of his business segment, but credits the Internet for fueling adoption over the last five to seven years.

Carfax says the Internet’s impact was felt much earlier than that. “The Internet boom in the late ’90s really helped launch our consumer business and an ad campaign was a logical next step,” Carfax officials wrote of the company’s milestone consumer campaign in 2000.

In recent years, both companies have sought to deliver their information in a customer-friendly manner. In 2007, Experian Automotive moved to a zero-to-99 scoring system that allowed both dealers and consumers to quickly assess a vehicle’s condition.

Carfax’s latest attempt at helping its customers understand its reports is the History Impact tool. As for what Sheehan thinks of the new feature, he says: “On that front, our policy isn’t to play in the pricing game and drive value adjustments. That’s the dealer’s territory.”

Comment

  1. 1. J. S. DAVID [ August 25, 2015 @ 09:49AM ]

    http://www.fwlaw.com/news/291-the-vexing-problem-erroneous-vehicle-history-reports

    A MUST READ.. CARFAX IS NOT LIABLE - so why bother.

  2. 2. Mark [ March 09, 2016 @ 08:48AM ]

    I've heard lots of issues against Carfax. Id rather switch to Vinaudit. Just can't afford to lose $40 for erroneous reports.

 

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