Carfax is great, unless you are selling your car

Accident repair can drop value dramatically

Carfax reports have become a car buyer's best friend because they show whether a car has ever been in an accident.

But there's a downside to Carfax and similar services like AutoCheck if you are trading in your car. Most car owners don't know about it until trade-in time, when they are offered thousands less for their trade.

New car takes a hit ... twice

Susanna Khachatryan was on the interstate last year when traffic stopped and the car behind her rear ended her SUV that was less than a week old.

"I was upset because my car was brand new, with only three days on the road and 278 miles," she said. "That was the most upsetting thing."

Fortunately, the other driver's insurance company paid to fix her tailgate and bumper, and her Acura looked good as new two weeks later.

But she got hit again when someone suggested she check her Acura's Carfax report.

Her new car now showed up with a scarlet letter: an accident, right on the top of the report. 

She says her conversation with the dealer was even more disheartening.

"It dropped at least $6,000 in value," she said.

Fender benders now lead to lower value

This is called diminished value, and it happens with every fender bender reported to police or insurance.

Twenty years ago, no one would have known your bumper, radiator and fender had all been crumpled and repaired. Now, anyone buying your car sees that immediately.

Jerry Jenkins is a vehicle appraiser with Appraisalwiseauto.com. He says many owners don't realize this until they try to trade in their car, and the dealership runs a history report on their vehicle.

"They learn that the dealer's offered them a very low ball offer. And they wonder why. And they find out because it has an accident history," Jenkins said.

That accident on the Carfax or AutoCheck report can lower your car's value 10 to 20 percent, he says, if the car is less than five years old with less than 100,000 miles. After 100,000 miles, it's considered an "older" car and an accident has very little impact on value. 

Jenkins said he once appraised a $200,000 Ferrari that lost $30,000 in value simply because of a small fender bender.

What you can do

But Jenkins says there is good news as long as the wreck was not your fault. You can recover that $2,000, $4,000 or even $10,000 in lost value, but it will take a little work.

He says you may want the help of an appraiser or lawyer because most insurance companies don't volunteer to help you.

"The insurance companies do not deal with it, they will say you have to do it on your own, we do not handle it," Jenkins said. 

He says you need to call the insurance company, then write to them with a professional appraisal showing your vehicle's new diminished value. They may low ball you the first offer, Jenkins says.

In addition, you don't want to try this if you are at fault and your insurer is footing the entire bill. That could count as a second claim on your policy and raise your rates.

Khachatryan threatened to go to court and in the end got a check for $5,000 in her Acura's lost value.

While Carfax reports have made it easy for dealers to offer less for your trade in, you should not blame Carfax.

The service is making car buying and selling more transparent, so that it's almost impossible to hide an accident from you next time you are buying. And as Martha Stewart used to say, that's a good thing.

As always, don't waste your money.

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