Check the Carfax

Hidden cameras reveal the Car Fox may give you a false sense of security.
7:28 | 03/16/13

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Transcript for Check the Carfax
Well, this is a real sign of the times. In the last year, nearly three times as many used cars were sold in america as new cars. That means more than 40 million used cars on the road right now with someone else's history under the hood. How do you know those cars are safe? Perhaps you've seen the adds for carfax. Tonight here we ask, is that famous fox giving you a false sense of security? I was driving down this highway 11 right here. Reporter: Danny chaney was heading down this oklahoma highway in the 2012 chevy truck he'd just bought from a used car dealer. When suddenly, as danny tried to make a turn, everything froze. He veered off the road. The passenger wheel locked up and just pulled the truck off to the side of the road. Reporter: Danny had just spent 20 grand of his hard-earned cash on that truck. And when we took the vehicle to the mechanic, it was just a matter of minutes before we heard this -- there is a lot of existing damage still on the vehicle. Reporter: The mechanic is convinced before danny bought that truck it had been in an accident, and that danny and his family were driving around in another accident waiting to happen. I'm definitely deeming the vehicle unsafe to drive. Reporter: Danny couldn't believe it. He knows the rap on used car salesmen, but he'd been show this. A carfax report, 40 bucks a pop, and you might think you're getting the full history of the car. But the report on danny's truck, showed no accidents, no damage reported to carfax. I bought into it man. If it didn't have a good carfax behind it, I wasn't gonna buy it. Reporter: Danny says he'd been hooked by that sly fox. He'd seen those clever carfax ads. Show me the carfax! Reporter: The wily car fox quick to bust any used car dealer who refuses to show you the carfax. Says here the car was -- totalled? What do you guys got? A crystal ball? Nope! She's got a carfax! This was a vehicle that we thought we could trust because of the carfax. And tonight consumer advocates say the chaneys are not alone, estimating millions of cars with hidden histories are sold every year by dealers who pull out that trusted carfax report. Dealers out there know the power of carfax, of the clean carfax? Absolutely. If david muir's buying a car, the dealer will not be stupid, they will have the carfax checked before they sell it to you. Saying the carfax shows you, david, this car has never been wrecked. Reporter: So you think consumers are bring lulled into a false sense of security? It's an understatement. Carfax, instead of protecting people, makes it more likely that they will be defrauded. Reporter: Defrautded? We went straight to carfax headquarters in virginia, where they're proud of that fox. Proud, that families all over america have seen the ad, and repeat it when they walk into the dealership. They actually come in and say "show me the carfax." Reporter: Which is exactly what you tell them to do. Yeah. And we do, do say that. Reporter: And so how many are actually doing that? Uh, millions of consumers. Reporter: Millions every year he says, learning more about the car they're buying. Carfax taking in data every day from sources like police departments and insurance companies. We have a database of 12 billion pieces of information, Reporter: You acknowledge that you don't know everything about a car? We don't know everything a about a used car. They don't know everything about that used car, that's not what the fox says in that ad! Show me the carfax! Reporter: Show me the carfax. We wondered what you hear at the dealership. Do they reveal that carfax doesn't know everything about that used car? Our producers armed with hidden cameras, go fox hunting. How are you? Good, how are you? Reporter: At this dealership in new jersey, we meet rico. Asking him to show us this 2011 mazda cx-7. Only 36,000 miles. Reporter: And this 2011 hyundai sonata. Reporter: And it took just minutes before he brought up the carfax. I'm going to show you both of the carfaxes. I'm gonna show you everything. Reporter: In fact, listen in. Rico's sales pitch relies on the carfax. When you look at the carfax, no accidents, one owner. You can't beat that carfax. Reporter: And to prove it, he says just look, green checks on both cars. No accidents, no damage reported to carfax. Reporter: And then rico's boss, no question he's a fan of the fox. Yeah. The carfax basically will tell you if it's been in an accident. You know, on our lot we don't keep anything ur lot that has accidents. Reporter: But what rico and his boss didn't know, was that we would do our own research on those two cars. One of carfax' competitors, autocheck, revealing that hyundai had actually been in a rear impact collision. And that the mazda, was not only in an accident, but a multiple impact collision the police report we obtained revealing it was the car in the middle, hit from the front and the back. And it wasn't just this one dealer. Our searching revealed dozens of cars sold on used car lots with clean carfaxes, even though the cars had been in accidents. And we weren't about to be outfoxed by the dealership. We were back on that lot, not with the carfax, but the police report. Hey rico, I'm david muir, with abc news and we have a few question about how you use the carfax in selling your cars. Okay. Reporter: About to reveal the true history of that mazda. We have a police report right here which says the mazda was in a major accident. Which mazda is this? Reporter: The mazda you've been trying to sell to our pal gerry here. Not only that, but we contacted the former owner of the mazda who told us he was in the accident and they were the middle car, so that car got smashed on both sides. I don't get under the hood of these cars or anything like that, I print out the carfax. If I print out a carfax and it says that its green that means the carfax is 100 percent. Reporter: You just said 100 percent accurate? But that's not a 100 percent. 99/100%. When that carfax doesn't reveal that the car has been in an accident, a major collision, do you not see something wrong there? You have to take that up with the carfax. You gotta take that up with the fox himself, I mean. Reporter: The fox? Yeah. Reporter: And so we did. Heading right back into the foxhole. We found the history of this car on one of your competitor's reports. Okay. Reporter: There is a big difference there, you would acknowledge, between no accident, your green check, and your competitor's report which says, multiple impact collision. Right. We do say on the carfax vehicle report that no accident has been Reporter: What would you say to someone who was going to buy this car based on the carfax report which said there were no ACCIDENTS?qGé Well, I would suggest that anyone buying a vehicle get a carfax vehicle history report and have that car inspected by a mechanic and take it for a thorough test drive. Reporter: A mechanic? A test drive? That's not what we hear from the fox in that tv ad. It says it on our website and it says it on every report that consumers are given. Reporter: And does it say that in the ads? It does not say that in the ads. Reporter: Do you think it should? I -- it doesn't say it in the ads. Reporter: And another place they don't say it. On the car lots we visited. The dealers, they're simply relying on the trust in that fox. And to prove it to carfax, we pulled that video of rico. A clean carfax means there's no accidents on it or nothing whatsoever. Reporter: You heard that dealer say, a clean -- wait, wait, wait. Reporter: A clean carfax means there is no accident. Nothing whatsoever. Right, but that isn't what i said, and it's not what anybody here at carfax said. The lesson is that people lie when they are selling used vehicles. Reporter: They said then it's the dealer who's lying. That's a witch's brew. Reporter: If one of your loved ones said to you, show me the carfax? I would say we need to talk. Just forget it. Protect yourself by having the car checked out, looked at. Show me the carfax.

This transcript has been automatically generated and may not be 100% accurate.

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