CARFAX and Accident Reports

We’re in the process of buying a new car and trading in our 9 year-old Volvo.  As someone who typically buys new cars, and not all that often, I haven’t paid a lot of attention to CARFAX.  Perhaps I should have.

The Volvo (in Death Valley)

I took the Volvo down to the dealer to get an appraisal of trade-in value. They asked a lot of questions about how it was equipped, if I was the original owner, and so forth. One question I had a small problem with was whether it had been in an accident.  Several years ago, we were rear-ended very lightly by a car that was unregistered and uninsured.  Normally I would just have taken the other driver’s name and insurance information and otherwise ignored this, but I felt it was my civic responsibility to get this uninsured driver off the road.  We called the Highway Patrol and waited until they arrived and took a report and dismissed us. The unregistered car was towed away.

Since a police report was taken, I also called my insurance company and reported the accident. They said that I was covered under my uninsured driver coverage, so I had the damage appraised and accepted a payment of a few hundred dollars for the damage, which was entirely cosmetic and hardly visible.  The appraiser even said that one of the door dings was more serious.

So the car has been in an accident.

The salesman returned to me with the CARFAX report, saying, “Bad news.”  He showed me the report; it had amazing detail on some things, like the maintenance history.  It showed every time we took the car for scheduled maintenance at the dealer, and that we had done so regularly.  But this was all negated by one fact:  The car has been in an accident.  The dealer said that as a result they would not be able to sell the car and would have to wholesale it, which lowered the trade-in value considerably. I feel like I’m being penalized for doing the right thing several years ago.

Now that I understand how this works, I’m going to think twice about reporting minor accidents. I’m also going to raise the deductible on my insurance policy, because the cost (in resale value) of a small insurance claim is potentially quite a bit higher than insurance would pay.

If I was more of a conspiracy theorist, I would probably say that CARFAX is conspiring with the insurance industry to discourage insurance claims.  I have heard similar comments about the effect of homeowner’s insurance claims on the resale value of one’s home. I’m not going to attribute this to a conspiracy, but it’s good to know how this works and adjust my behavior accordingly.  CARFAX would offer a considerably better service if it would report the assessed value of the damage or do something to provide finer granularity beyond, “The car has been in an accident.”