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Fighting knowledge monopolies, or how to avoid being ripped off; 'Information imbalances' cost North Americans billions of dollars a year. One intrepid economist wants to change that.

[ONT Edition]

Toronto Star - Toronto, Ont.
Author: Jeff Roberts
Date: Nov 17, 2007

Henry Schneider, an economist at Cornell University, believes that auto mechanics are no more dishonest than the rest of us. His opinion is something of a surprise in light of his research.

In a new paper, Schneider describes data from undercover visits to Canadian garages, which show that 61 per cent of the total sum spent on car repairs was completely unnecessary. Repeating the undercover experiment in the United States, he found the same thing an industry characterized by systemic rip-offs where concern for reputation had little effect on service.

These findings did not lead Schneider to conclude that mechanics are inherently dishonest. Rather, he points to a larger and more subtle phenomenon known in economics parlance as "agency problems."

His conclusion is that an information imbalance in auto repairs and a host of other service industries is costing North Americans billions of dollars every year.

Schneider is definitely not your grandfather's economist. A boyish-looking 33-year-old with a PhD from Yale, he has a penchant for hiking and vegetarian cooking. Schneider is also a loose disciple of the Freakonomics movement, a new generation of scholars who are applying economic theories to everyday events.

His initial intention was to explore how information problems led to overcharging in the American health-care system but encountered problems gathering evidence.

Instead, he decided to explore the car repair industry, which is also characterized by expert service providers who hold a large information advantage over their clients. The project would also give Schneider a chance to ply his skills in the real world. "I just thought it would be fun to get out into the field and away from my laptop. It sounded exciting to get out and do some undercover work," Schneider said.

Schneider's first stop was the Automobile Protection Association. Based in Montreal and Toronto, the APA is, to his knowledge, the only organization of its kind in North America. Its team of undercover mechanics tests the honesty of Canadian garages and post its findings on the Internet.

The APA not only provided data for Schneider to analyze, it also taught him a few simple mechanical tricks that allowed him to perform undercover experiments of his own. Schneider, the Ivy Leaguer turned car mechanic, then set off to perform his own field work in Connecticut.

His results proved to be remarkably similar to the Canadian data and suggest that there is cause for motorists on both sides of the border to feel dismayed.
A loose battery can result in a car failing to start from time to time. It is a defect that is easy to spot and correct. Armed with this information, Schneider set out to get his father's Subaru inspected. He loosened the battery cable and supplied four other minor and obvious defects to the car that was otherwise well maintained.

He approached the mechanics with a standard script "We bought the car recently and it hasn't started a few times - can you check that out? We also want a thorough inspection to see if any other work needs to be done."

The results were eyebrow-raising to say the least. In 22 of 40 visits, less than $50 in repairs was recommended and the loose battery cable was discovered in 27 of the visits. However, in 12 of the visits, more than $400 in repairs was recommended while two garages recommended repairs of $1,398 and $1,849.

Seven mechanics recommended replacing the healthy starter while three suggested changing an already-new battery. Despite the request for a thorough inspection, only a quarter of the garages detected the most serious of the obvious defects Schneider had created (low coolant level) and only 10 per cent of them identified a majority of the five defects.

The mechanics' lack of concern for reputation is another significant and discouraging element of the findings.

In the experiment, Schneider suggested the possibility of repeat business to half of the garages. To the other half, he suggested he would not be back . While the possibility of repeat business significantly affected the price for the inspection, it had almost no effect on the standard of work that was performed.

Car repairs and other "expert services" like dentistry and roofing work differ from services like housecleaning or snow removal in that a lack of information prevents clients from evaluating the work they receive.

In economic terms, this represents an absence of incentives to produce a "reputation effect" that should mitigate rip-offs.

The result is that North Americans pay vast sums of money every year to receive services they do not need or which they fail to receive at all.

Schneider makes the astute observation that information problems that occur in industries like auto repair have serious implications for overall economies. This is especially the case for a country like Canada that is trying to position itself as a post-industrial, service-based economy. If our future is to be based on intellectual wealth, it would seem imperative to correct the information problems that facilitate systemic and widespread rip-offs. Fortunately, there appear to be a number of ways to counteract the knowledge monopolies that are often unfairly exploited by expert services providers.

Schneider notes, for instance, that the cost of introducing a system of undercover garage inspectors in Connecticut would be dwarfed in relation to the potential benefits that would occur.

Expanding non-governmental bodies like Canada's APA presents another model for correcting information problems in expert services. "I think it's definitely a very appealing possibility," says Schneider. "Yes, it would be more efficient. From my point of view it's something that should be explored. If the APA had more money, they really could do great stuff."

Another possibility is to draw on collective consumer opinion by compiling buyers' experiences with expert sellers. Even though individuals lack adequate information to judge the service, their collective opinions would likely reveal clear patterns of behaviour. Ultimately, Schneider appears to be right in looking past the proverbial dishonest mechanic in order to understand car repair rip-offs.

The answer instead seems to lie in solving systemic information problems. "I don't think mechanics are inherently more or less dishonest than anyone else. People respond to economic incentives. I don't think it's in anyone's interest to turn opportunities down."

Jeff Roberts is a lawyer and recent graduate of McGill University where he studied law and economics

Credit: Special to the Star
(c) Jeff Roberts 2007


Now We Have the Tools and the Forum to help us

STOP AUTO Repair Rip-Offs



Communication is the Key to Effective Auto Repair

By Tom Torbjornsen   [Learn More]

In today's hectic fast-paced world, it's easy to forget the importance of thorough communication in any transaction. There is evidence of this constantly in the auto repair business. A common part of conversation between a repair facility and a customer might be "I didn't say that!" or "You never told me it would cost that much money!" How about "I never promised that!" and the classic, "That's not what I told you to fix!" Why so much confusion and misunderstanding? I'll tell you why -- lack of thorough communication.

Picture this -- it's 7:00 a.m. on a Monday morning. You're running late, and on the way into work you have to drop the car off for service. The car just doesn't seem to be running right. You think to yourself, "It probably needs a tune-up." Your co-worker agreed to meet you there for a ride to work, and you can't make him late too! You arrive at the shop anxious and flustered, drop the keys on the service desk, and abruptly say to the service writer, "It needs a tune-up. I'll pick it up at 5 o'clock." Then out the door you run.

Two major communication errors have occurred in this scenario. First, you assumed all that was wrong with your car was that it needed a "tune-up." With computer-controlled cars nothing could be further from the truth. Remember the self-compensating nature of the car's computer? If the engine is running poorly, it's because the computer is not functioning properly and cannot adjust itself.

The service writer made communication error number two. His job is to find out exactly what is going on with the car before letting you out of the shop. Failure to do this task will always result in poor service work.

Let's assign everyone his or her responsibilities so that the repair process can go smoothly. Mr. or Ms. motorist, please note closely as to when the problem occurs. For instance, does it occur when the engine is hot or when it is cold? when turning right or left? when braking or accelerating? with the lights on or off? Did you notice the problem after gassing up yesterday? The point? -- make sure you communicate this vital information to your service provider in your own terms! Don't try to speak in technical terms, because you might communicate inaccurate information and confuse the diagnostic process. Go for a road test. Take either your service writer or the technician working on your car and show him/her exactly what it is you want addressed. This helps take the guesswork out of the repair process and makes for accurate diagnosis and repair.

Service writers -- ASK QUESTIONS! The customers are there for you to solve their problems! Ask questions about when the problem started, under what specific conditions does it occur. Ask for the service history on the car, to see what work has been done to this point. Take the car out for a road test with the customer present so you can experience what they are talking about (let them know ahead of time you may want to do this so that they can plan it into their busy schedules). Once you find out what is wrong, give your customer the repair options with prices. Make sure that you have a way to reach the customer if they leave the car at your facility. Stay in contact with your customer during the repair process, keeping them up to date on the progress. Don't perform any unauthorized repair work -- always get approval first!


Secrets of an auto mechanic
By Kevin McDonald •

Most of us would not take our car to just any auto mechanic. We want one who is trustworthy and will do the job right -- the first time. Though there are honest mechanics, sometimes finding one is harder than catching a fish without a hook.

Modern automobiles are so complicated that when ordinary Joes and Janes bring their cars in for service or repairs, they have trouble knowing if a mechanic is being truthful or taking them for a ride. spoke to auto mechanics with more than 20 years of experience to learn what you should be aware of before handing your keys over to a guy with a wrench in his pocket.

The simple inspection
The cleanliness of the shop is an indication of the quality of work you can expect. Because mechanics deal with oil and crud all day doesn't mean the shop should look like a pigsty. Today, cars and trucks are much more computerized than their predecessors. So you may want to see if the shop has the latest equipment to properly diagnose and service your car. But that's not all.

"The new technology is a help, but if you're not trained it can cause you to misdiagnose," says our expert, who spoke to us on condition that he remain anonymous.

for Women

By Linda Sharp,

The more you know about your car, the better you can care for — and drive — it. Understanding the intricate details and parts not only will help you keep it running longer, but it will also make dealing with mechanics and service departments easier.

1. Read the Owner's Manual

Your vehicle is probably the most complicated machine you own; learning the details about its parts, how it runs and when to take it in for maintenance makes you an informed owner and helps to reduce costly breakdowns. This knowledge will serve you well throughout ownership.

2. Change the Oil

Oil is the lifeblood of you car, so change it according to the manufacturer's recommended schedule, which may be at intervals of 3,000, 5,000 or more miles. Some cars have an oil-life monitor that will notify the driver when the oil needs to be changed. In addition, use the type of oil the automaker suggests; this alone will increase your vehicle's longevity.

3. Maintain Tire Air Pressure
Check the air pressure in your car's tires. Underinflated tires can cause tire failure or flats.

Check the air pressure in your car's tires. Underinflated tires can cause tire failure or flats.

It's very important to check and maintain proper air pressure in your car's tires. Underinflated tires are the No. 1 cause of tire failure or flats. When a tire is underinflated, it builds up heat internally, which can cause a blowout. Underinflated tires also decrease fuel economy by as much as 10 percent. Look on the driver's doorjamb for a label marked Tire and Loading Information for more details. It's best to check tire pressure when the tires are cool. Use a quality tire-pressure gauge.

4. Pay Attention to Your Car's Warning Lights

Modern vehicles can have any number of warning lights for various onboard components like the antilock braking system. Sometimes, the behavior of a given warning light — a flashing check engine light versus a steady one — may indicate two entirely different issues, so it's important to understand each warning light's purpose, its various modes and what to do if they illuminate. You can generally consult your owner's manual to learn this information.

5. Check Your Vehicle's Vital Fluids Regularly

These include your radiator coolant, engine oil, brake fluid, power-steering fluid and automatic transmission fluid. You can do this, or a mechanic can take a look during routine maintenance. Ask how to properly check these things yourself, too.

The owner's manual provides details about fluid levels and recommended maintenance. Some tips: Never remove the radiator cap when the engine is hot or the car is running. Check your oil when the car is off but the engine is still warm. Check the transmission fluid with the car running but in Park.

6. Get Rubber Engine Components Inspected
Get your car's belts and hoses inspected every six months to prevent a breakdown.

Get your car's belts and hoses inspected every six months to prevent a breakdown.

Belt and hose failures are the No. 1 cause of roadside breakdowns. Rubber components under the hood are exposed to extreme heat, so they tend to wear out faster than other parts on your car. Get belts and hoses inspected every six months and before long trips. It's more cost effective to replace them before a breakdown occurs.

7. Know Your Car's Acronyms

Many of today's vehicles come with a healthy dose of alphabet soup: ABS, TCS, ESP, etc. These letters often designate a computer-controlled function that enhances the driving experience. An antilock braking system, or ABS, is a computerized system that prevents wheel lockup and skidding during braking. If your ABS light comes on and stays on, you should take your car to a mechanic for inspection because there could be a problem with the system.

TCS, or traction control system, helps eliminate wheel spin during acceleration. ESP could mean an electronic stability program is part of your car's features. There are many acronyms affiliated with vehicles today, and the only way to find out what some of these things mean is to look in the owner's manual.

8. Use the Right Tires for the Season

Make sure your tires are appropriate for your driving environment. While all-season tires may provide adequate traction on snow and ice, if you spend a considerable amount of time driving in wintry weather, then it may be worthwhile to purchase a set of snow tires for your car. Snow tires are optimized for winter driving conditions, whereas all-season tires are designed to handle a wider range of road and temperature conditions. If your car is equipped with summer tires, you definitely should install snow tires if your travels take you through snow-covered areas.

To make snow-tire installation and removal easier in the fall and spring, you can purchase a separate set of wheels exclusively for your snow tires.

9. Know Which Wheels Drive Your Car

Is it equipped with front- , rear- or all-wheel drive? A front-wheel-drive car will handle differently than one equipped with rear- or all-wheel drive, and vice versa. This is especially true when road conditions are poor.

Front-drive cars have been praised for their ability to accelerate and maneuver in snowy conditions, but modern rear-wheel-drive cars equipped with traction control and an electronic stability system are a far cry from the fishtailing, rear-drive cars of the past. All-wheel-drive systems send available engine power to the wheels with the most traction and can enhance dry-road handling characteristics in addition to snow performance.

10. Keep Your Car Clean

Don't drive around with dirty windows, and make sure your headlights are clean and properly aimed. Dirty headlamps can drastically reduce the amount of illumination provided; if you can't see something on or alongside the road, you can't avoid it. Additionally, an improperly aimed headlight greatly reduces its effectiveness and affects visibility for oncoming drivers. Keep your car clean, if for no other reason than safety.

General OBD-II Information

What is OBD-II?
OBD-II stands for On-Board Diagnostics, II generation. It is a set of documents issued by SAE and ISO, which describe the interchange of digital information between on-board emission-related Electronic Control Units (ECUs) of road vehicles and an OBD-II scan tool. OBD-II also commonly refers to the physical on-board diagnostic system of a vehicle, which consists of an ECU (or multiple ECUs), Malfunction Indicator Light(MIL), Diagnostic Link Connector (DLC), and the wiring that connect the different elements.

How do I know whether my car is OBD-II compliant?
There are several ways.
1996 or newer model year vehicle sold in the United States
United States legislation requires all cars and light trucks model year (MY) 1996 and newer to be OBD-II compliant.

2001 or newer model year gasoline vehicle sold in the European Union
Commission Directive 70/220/EEC, Annex I:

Vehicles with positive-ignition engines
With effect from 1 January 2000 for new types and from 1 January 2001 for all types, vehicles of category M1, except vehicles the maximum mass of which exceeds 2500 kg, and vehicles of category N1 class I, must be fitted with an on-board diagnostic (OBD) system for emission control
in accordance with Annex XI. [...]
Note that here "European Union" means countries which were members of the EU in 2000.

2004 or newer model year diesel vehicle sold in the European Union
Commission Directive 70/220/EEC, Annex I:

Vehicles with compression-ignition engines
Vehicles of category M1, except
- vehicles designed to carry more than six occupants including the driver,
- vehicles whose maximum mass exceeds 2500 kg,
from 1 January 2003 for new types and from 1 January 2004 for all types, must be fitted with a 1

on-board diagnostic (OBD) system for emission control in accordance with Annex XI.
Note that here "European Union" means countries which were members of the EU in 2003.

Other vehicles
If your vehicle does not fall into any of the above categories, look under the hood and try to locate a label (Fig. 1) that explicitly states that the vehicle was designed to comply with OBD-II legislation.

Vehicle Emission Control Information Label

In this case, OBD-II is used as a general term and can mean any of the following:
OBD II (California ARB)
EOBD (European OBD)
JOBD (Japanese OBD)
You may also consult your vehicle's owner's manual and perhaps contact your local dealer. However, be aware of the fact that many dealers do not know the difference between OBD and OBD-II.

If the vehicle is not OBD-II compliant, you cannot use a generic OBD-II scan tool such as U480 to obtain diagnostic information from your vehicle.

But my car has the 16-pin OBD connector, shouldn't it be OBD-II compliant?
No, not necessarily. A lot of European and Asian manufacturers equipped their vehicles with D-shaped 16-pin connectors long before they began installing OBD-II systems on those vehicles. One curious thing to note here is the fact that most non-EOBD compliant vehicles had a DLC that does not fully conform to SAE J1979. Compare figures 2 and 3, and notice the "ears" on the non-EOBD compliant Ford Focus.

Fig. 2 - Ford Escort DLC Fig. 3 - J1962 Vehicle Connector, Type A
(courtesy of DigitalFriction, UK) (courtesy of SAE)

Which OBD-II protocol is supported by my vehicle?
All cars and light trucks built for sale in the United States after 1996 are required to be OBD-II compliant. The European Union OBD legislation is somewhat more complicated. An OBD-II compliant vehicle can use any of the five communication protocols: J1850 PWM, J1850 VPW, ISO9141-2, ISO14230-4 (also known as Keyword Protocol 2000), and more recently, ISO15765-4/SAE J2480 (a "flavor" of CAN). US car manufacturers were not allowed to use CAN until model year 2003.

There are two types of diagnostic link connectors (DLCs) defined by SAE J1962 - Type A and Type B, shown in Figures 2 and 3, respectively. The main difference between the two connectors is in the shape of the alignment tab.

Location - According to J1962,Type A DLC "shall be located in the passenger or driver's compartment in the area bounded by the driver's end of the instrument panel to 300 mm (~1 ft) beyond the vehicle centerline, attached to the instrument panel and easy to access from the driver's seat. The preferred locati-o n4 -is between the steering column and the vehicle centerline."

Fig. 1 - J1962 Vehicle Connector, Type A
(courtesy of SAE)

Type B DLC "shall be located in the passenger or driver's compartment in the area bounded by the driver's end of the instrument panel, including the outer side, and an imagined line 750 mm (~2.5ft) beyond the vehicle centerline. It shall be attached to the instrument panel and easy to access from the driver's seat or from the Co-drivers seat or from the outside. The vehicle connector shall be mounted to facilitate mating and unmating."

Fig.2 - J1962 Vehicle Connector, Type B
(courtesy of SAE)

As a general rule, you can determine which protocol your vehicle is using by looking at the pinout of the DLC:

Fig. 3

The following table explains how to determine the protocol:
Pin 2 Pin 6 Pin 7 Pin 10 Pin 14 Pin 15 Standard
must have must have J1850 PWM
must have J1850 VPW
must have may have* ISO9141/14230
must have must have ISO15765 (CAN)

Pin 15 (also called the "L-line") is optional in newer vehicles that use the ISO9141-2 or ISO14230-4 protocols.

In addition to pins 2, 7, 10, and 15, the connector should have pins 4 (Chassis Ground), 5 (Signal Ground), and 16 (Battery Positive). This means that:

PWM The connector must have pins 2, 4, 5, 10, and 16
VPW The connector must have pins 2, 4, 5, and 16, but not 10.
ISO The connector must have pins 4, 5, 7, and 16. Pin 15 may or may not be present.
CAN The connector must have pins 4, 5, 6, 14, and 16.


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