How to read a Carfax report

By: Arshi Hossain on January 25, 2024
Article image

An Ottawa resident and recent owner of a used Honda civic found herself stuck with the car's engine turned off in the middle of an intersection just a few weeks after she bought it from a used car dealership.  

If a pre-owned car offer appears too good to be true, it’s likely that the seller may not be disclosing all the facts, or worse – hiding and covering up a past accident. 

This is why it’s important to understand the actual state of the car you’re considering purchasing to prevent acquiring a vehicle that has more issues than it appears to have.  

Not only will you be paying more for repairs, but you’ll also be paying more on insurance premiums. Although insuring a used car is generally less expensive than a new one, the cost may increase if the car’s condition is poor due to the heightened risk of accidents or malfunctions. 

What is a Carfax report? 

A Carfax report, also known as a vehicle history report or simply a car report, is a comprehensive document that provides detailed information about a vehicle’s history. It’s generated using the unique 17-character vehicle identification number (VIN) and is instantly created from a database of over 32 billion records

Most vehicle histories in Canada are provided by an agency called Carfax Canada, however, there are other alternatives which we touch on below. 

In addition to providing information about your vehicle's history, Carfax reports can come in handy when negotiating the price of a used vehicle. For example, if the report shows that the vehicle has been in an accident or has a salvage title, you may be able to negotiate a significantly lower price.  

Similarly, if the vehicle has a clean history and has been well-maintained, this can justify a higher price. Remember, knowledge is power when it comes to negotiating a fair price for a used vehicle. 

How do I know if I have a lemon? 

A ‘lemon’ refers to a car that has significant manufacturing defects affecting its safety, value, or utility. If these defects cannot be fixed within a reasonable amount of time, the car is often termed a lemon. 

These defects could include issues like a completely dead engine, damaged transmission, faulty brakes, or other problems that prevent the vehicle from being driven. If a manufacturer or authorized dealership cannot repair a vehicle despite a reasonable number of repair attempts, then you have a lemon on your hands. 

Read next: How to estimate the cost of insurance before buying a car 

How much does a Carfax report cost? 

Carfax Canada currently provides a basic version for $43.95 plus tax, and with inflation, a price increase is anticipated soon. If you wish to include information about liens, the cost escalates to $60.95. 

Of course, if the dealer or seller already possesses the report and allows you to view it, there’s no cost involved! 

What is the vehicle identification number (VIN)? 

The VIN is a unique code that is assigned to every vehicle when it’s manufactured. It’s essentially the automotive equivalent of human DNA - no two vehicles have the same VIN. 

It is composed of 17 characters (digits and capital letters) and serves as a reliable identifier for a vehicle. When it comes to tracking a vehicle’s history, the VIN plays a crucial role. It’s used to record and track the vehicle’s history throughout its lifetime. This includes ownership transfers, maintenance records, accident reports, and more. 

Related: This is how the car you drive affects your insurance rate 

What you should look for in a Carfax report 

A Carfax report provides a wealth of information that can significantly reduce the risks associated with buying a used car. Here’s why: 

Accident history: A Carfax report can reveal if the car has been involved in any accidents, from minor fender benders to total losses. This information can help you avoid vehicles with potentially hidden damage. If the vehicle has a clean record with no past accidents, it could be seen as a lower risk, potentially leading to lower insurance premiums. 

Lien status: Over 40% of vehicles have an active lien. A lien is essentially an unpaid loan for the car. If it hasn’t been paid off, you could be legally responsible for the previous owner’s debt. A Carfax report can help you easily see if there’s an active lien on a vehicle. 

Preventing scams and frauds: Carfax reports can help drivers avoid fraudulent sellers who may try to conceal information about the car’s history. By checking the report, you can identify potential frauds or scams, and avoid wasting time and money on a vehicle that isn’t what it seems. 

Service history: Knowing what maintenance a used car previously had, and how frequently it was done, can prevent problems from occurring down the road. The report can show you what service was done, who it was performed by, and how often, so you and your insurance company know what shape the car is in.  

Unfixed safety recalls: An estimated 1 in 6 Canadian vehicles have an unfixed safety recall. These vehicles have been deemed unsafe to drive by their own manufacturer. The report can help you find out if the vehicle you’re considering is safe regardless of whether the car dealer assures you it is. 

Related: Kilometres on used vehicle listings rising amid global vehicle shortage 

Other red flags to watch out for 

Salvage titles: If a vehicle has been declared a total loss by an insurance company due to severe damage from an accident, flood, or other event, it may carry a salvage title. This is a significant red flag as the vehicle may have hidden damage that could affect its safety and reliability. 

Odometer discrepancies: If the mileage recorded in the report doesn’t match the mileage on the vehicle’s odometer, or if there are gaps in the mileage history, this could be a sign of odometer fraud. 

Obtaining a Carfax report 

Whether you’re buying a used car privately or from a dealer, obtaining a Carfax report is a straightforward process: 

From a dealer: Reputable dealers often provide a free Carfax report for their vehicles. It’s a sign of transparency and willingness to disclose the vehicle’s history. If it’s not immediately offered, don’t hesitate to ask for it. 

Private seller: If you’re buying from a private seller, you can ask them to provide a Carfax report. If they don’t have one, you can purchase it yourself. To do this, you’ll need the vehicle’s VIN. 

  1. Visit the Carfax website
  2. Locate the “Enter your VIN” box. 
  3. Enter the VIN of the vehicle you’re interested in. 
  4. Proceed to purchase the report. 

Remember, the cost of the report could be a worthwhile investment, considering it can provide detailed information about the vehicle’s history and potentially save you from future headaches. 

Alternatives to a Carfax report 

If you’re hesitant to spend money on an official Carfax report, there are several alternative methods to gain insight into a vehicle’s history: 

VINCheck: This free service provides a basic vehicle history report. While it may not be as comprehensive as a carfax report, it can still provide valuable information, such as whether the car has sustained any significant damage. It may not provide details like ownership or service history, but it can help you identify major red flags. 

Carfax Canada’s free vehicle history check: If you’re not ready to invest in a full report, Carfax Canada offers a free abbreviated version through its VIN Decoder tool. This summary report can provide highlights on recall notices, accidents, and other types of damage. If you find anything suspicious, you can then decide whether to purchase a full report. 

VinAudit Canada: Another service that provides affordable vehicle history reports. It differs from Carfax Canada in that it is less expensive and includes features like manufacturer buyback and salvage auction data, while Carfax provides more comprehensive accident and service records. 

Government recall database: If you’re unable to afford a detailed report, you can use the government’s recall database. By entering the make, model, and year of the vehicle, you can find out if there have been any recalls. This can be used in conjunction with the free Carfax check for a more comprehensive view of the vehicle’s history. 

The importance of a mechanic’s inspection 

While a Carfax report is an invaluable resource in the used car buying process, it should not substitute a professional mechanic’s inspection. A mechanic can identify potential issues that may not be documented in the report, such as mechanical problems or signs of wear and tear. Always have a trusted mechanic inspect the vehicle before making a purchase. 

This two-pronged approach not only ensures you’re making a sound investment, but it can also influence your car insurance decisions. The insights gained from both the Carfax report and the mechanic’s inspection can help you understand the potential risks associated with the vehicle, which in turn can guide you in selecting the appropriate coverage for your car insurance

Remember, the goal is not just to buy a car, but to secure a reliable vehicle that won’t surprise you with unexpected repair costs or high insurance premiums. Your journey to a smart car purchase doesn’t end at the Carfax report; it’s just the beginning. 

Related: Should you get your car serviced at an auto shop or dealership? 

Save 20% on average on car insurance

Compare quotes from 50+ Canadian providers in 3 minutes.