CarFax Report Issue
Recently, reports have been surfacing that CarFax has enabled a feature that would allow reports of prior damage well after the fact. This means, a dealer could sell a vehicle with a clean CarFax, and months or years later an item could surface on the report that there was an accident or serious repair prior to the date of sale.
This is important because Colorado has one of the strictest disclosure requirements in the country. Unlike many states who trigger disclosure only when the repair reaches a certain dollar value or percentage of the vehicle's value, the regulation to 44-20-121(3)(h) requires the disclosure of any 'material particular.' This is interpreted to mean anything that is material to the consumer at the time of sale. I typically synthesize this requirement as, "if it matters to the consumer, it matters to the state."
If this requirement is triggered, the dealer has the responsibility to disclose any material item known to the dealer at the time of sale. The regulation provides a non-exhaustive list of things that are material and things that are not. But, it is always better to over-disclose than under-disclose. Now, with that said, a dealer cannot disclose what they do not know.
Now, CADA has always recommended that a dealer print the CarFax on the day of the sale - i.e. the day the contract was signed - and to keep a copy signed by the customer in the deal jacket as evidence of what the dealer knew at the time of sale. However, we are increasingly finding that a signed CarFax alone is insufficient to dispel liability in many states. Why is this? For a deep dive, see Sanchez v. AN Luxury Imports, D. Ct. FL, 2017 WL 1364000.
A clean CarFax is only one way a dealer may have known about prior damage to a vehicle. There are actually four ways a dealer may know/learn of prior damage: report of the previous owner, pre-sale inspection (not required, except in a CPO situation), a vehicle history report such as CarFax, or a NHTSA report. And, of course, if the non-disclosure is an issue of a salvage brand or a manufacturer buy-back/Lemon Law, dealer knowledge is immaterial in the failure to disclose. A prudent dealer needs to defend against all four outlets, not just the CarFax element.
For the best dealer protection under Colorado specific regulation, I highly recommend using the Rocky Mountain 615 Vehicle History and Damage Disclosure. This form was developed to supplement the 645-ARB and 649-RISC Retail Installment Sales Contracts. It provides a blank space to reference anything known to the dealer at the time of sale (including a clean CarFax) and any notes made by a service technician during a re-conditioning, or prior owner disclosures, so that all four dealer knowledge elements can be satisfied. While no one document is perfect, the RM 615 has stopped many consumer complaints from becoming lawsuits if a copy bearing the customer's signature can be provided back to them at the time of the complaint.