Founder and Managing Partner
Partner, Chair of the Regulatory and Licensing Practice
Commercial vehicle history reports like Carfax™ and Autocheck™ have grown in popularity in the last several years and are commonly given to customers who purchase used vehicles at dealerships. These reports, however, are also a source of problems for dealers. In fact, consumer attorneys attempt to admit vehicle history reports and the information contained in them into evidence in consumer lawsuits claiming the dealer failed to disclose prior damage and accident history. To help defend against such allegations, dealers should consider adopting a policy and setting internal procedures to effectively and provably disclose information to customers.
Common vehicle history report problems
Third party vehicle history companies do not physically inspect vehicles, but rely on information compiled from a wide array of sources, such as insurance companies, police departments, repair facilities, state motor vehicle agencies, and auction lots. The vehicle history reports are therefore only as good as the information that is received from these sources. Further, information is sometimes delayed by weeks of months.
The results are varied - different reports for the same car will often reveal different information, an accident will not show on the vehicle history at the time of sale but may show up months or years later, or an odometer rollback may be misreported. Dealers must establish best practices and be conscious of the growth in lawsuits spurred by customers pulling a vehicle history report after their vehicle purchase and seeing new information that did not appear at the time of purchase.
While dealers are not body shops and their technicians are trained to diagnose and repair problems with the operation of vehicles, not to determine whether a vehicle suffered body damage in an accident, angry customers looking for someone to blame when they belatedly discover that their vehicle contained undisclosed damage will try to blame the selling dealer, who was as much in the dark about the prior damage as the customer.
Effective policy and procedure
Consumers expect to receive a vehicle history report when purchasing a used vehicle. This makes it important for dealers to consider implementing a policy and set of procedures designed to protect themselves from claims by misguided consumers arising from these reports. While the business and operations issues at dealerships vary, below are five suggested elements for an effective policy.
Pull a new report every time
Most dealerships pull a report when they purchase or accept a vehicle in trade.
- Before purchasing a vehicle or accepting it on trade, consider double-checking the vehicle’s history against other sources: NMVTIS, check the vehicle title certificate for prior rental use, review the auction inspection documents.
- Consider requiring your trade-in customer to execute a vehicle history form and statement of facts, wherein the customer is encouraged to disclose material events in the vehicle’s history, including accidents or damage or unusual usage.
- Consider pulling another vehicle history report at the time of sale to determine whether any new information was reported on the vehicle between the date the dealership acquired the vehicle – on trade or through auction – and the date of sale.
- Consider pulling a vehicle history report from both Carfax™ and Autocheck.™ Sometimes information contained on one company’s report is not contained on other company’s report. We have been involved in several cases in which the dealership pulled a Carfax™ report, but not an Autocheck,™ where the Carfax™ report was clean but the Autocheck™ report showed a reported accident or damage. As an alternative, if you pull a Carfax™ when you acquire the vehicle, consider pulling an Autocheck™ report on the date of sale. That way, you can obtain the collective information from both services.
- In addition, most vehicle history reports now contain the print date of the report. Consider pulling a new report on the date of sale and present to the customer for review prior to the vehicle sale. This is helpful as it shows that the dealer who pulled the report on the day of the sale provided the most up-to-date information available at the time of the sale.
Consider requiring that customers sign the report
Reliable documentary evidence is better than testimony when a dealer has to prove what was disclosed to a customer. The best way to prove that your dealership provided a copy of a vehicle history report to a customer is to have the customer sign the report itself, clearly establishing that the customer saw and had an opportunity to read the report. Consider also circling any negative references on the report and having the customer initial the report at that location. Be sure to maintain the original of the signed vehicle history report in the deal file and provide the copy to the customer for him or her to keep.
Consider using an acknowledgment and disclosure form
Dealers should consider also having customers read and sign a separate acknowledgement and disclosure form. The form should do all of the following:
- affirm that the customer received a copy of the vehicle history report;
- explain that the dealership did not create the report and does not vouch for its accuracy;
- disclose all vehicle history information obtained from the trade-in customer or auction;
- inform the customer of his or her right to have the vehicle inspected; and
- state that the dealership made no representations or warranties about the condition or history of the vehicle except those made in writing.
It is important to have the customer also sign this document, maintain the original in the deal file and provide the customer with a copy. This acknowledgement form should also include an acknowledgement that the customer received a signed copy of the acknowledgement form.
Never orally represent that a vehicle has not been involved in an accident
As discussed above, a dealer is generally not equipped to answer questions about the accident or repair history of a vehicle it takes in on trade or purchases from auction. Therefore, consider adopting and circulating a written policy to your employees, prohibiting them from orally representing that a vehicle has not been involved in an accident. That policy should also direct your employees to inform the customer that the dealership relies only on information it receives from other sources concerning the vehicle’s history and encourage the customer to have the vehicle independently inspected by a body shop at his or her own expense before purchase.