Car History Reports Fall Short

(CBS)  Vanessa Beard had her used car a month when she heard some bad news from a mechanic.

She was told the car had major water damage and that its frame was shifting.

It was the kind of damage sustained in a front-end collision; damage which a trained eye spotted in a minute. But, as CBS News Correspondent Cynthia Bowers reports, Beard never heard about it from her dealer.

The same thing happened with David Wright, who found out after he bought his used truck how badly it'd been wrecked. When he tried to take it back, the dealer scoffed.

As the car dealership told CBS News, it's a buyer beware market: Buyers must beware and be detectives too.

Beard and Wright's dealers gave them reports from Carfax that showed "no accident indicators reported".

Carfax is an online company that searches databases for a vehicle's history, claiming to be "your best protection against buying a used car with costly, hidden problems."

But, critics say when it comes to many accidents, online reporting companies fall short. A class-action lawsuit against Carfax claims the company doesn't have access to police accident data in 23 states.

Tennessee attorneys Frank Watson and David McLaughlin charge that Carfax's ads promise more than it can deliver.

"Carfax fails to disclose the limitations of their database," says Watson.

"People think they have a little insurance policy on their Carfax report, and it's just not accurate," says McLaughlin.

And critics believe some unscrupulous dealers are hiding behind a clean Carfax, using it to pass off damaged cars to customers, then claiming ignorance if the consumer complains.

"Carfax gives very little information, especially here in Texas," says John Adams of Auto P.I. Used Car Inspections. "We have seen Carfax come up through the ranks, and we have seen a lot of our customers use Carfax, and a lot of them have been very disappointed in finding out that the Carfax report is clean when we find major damage."

Carfax, which is endorsed by some consumer groups, says its access to information is the best around.

"We've always suggested customers use a Carfax vehicle history report in combination with inspection by a mechanic," says Larry Gamache of Carfax. "Listen, there are literally thousands of accidents that happen every day that never get reported."

Gamache adds that the real crux of the problem is people failing to disclose the information. That, he says, is a dishonest practice.

Beard found that out the hard way.

"I'm upset with Carfax, I'm upset with who I purchased the car from," says Beard. "I'm just totally upset cause I'm stuck with a clunker."

Next time, she says, she'll make sure to get her own inspection, before she buys.