Running Head: PRICES OF USED VEHICLES IN THE U.S. Group Project Prices of Used Vehicles in the United States Prepared By Group #2 ANLY 500- 91– O Harrisburg University of Science and Technology Spring 2019 1 PRICES OF USED VEHICLES IN THE U.S. Table of Contents Abstract .......................................................................................................................................... 3 Introduction ................................................................................................................................... 4 Market of Used Cars ..................................................................................................................... 5 Purpose Statement ........................................................................................................................ 7 Research Question ........................................................................................................................ 7 Method(s) of Analysis ................................................................................................................... 8 Data Collection Method ............................................................................................................ 8 Data Analysis Method............................................................................................................... 8 Discussion of Findings .................................................................................................................. 8 Descriptive Statistics ................................................................................................................. 8 Conclusion and Recommendations ............................................................................................. 9 References .................................................................................................................................... 10 Appendices ................................................................................................................................... 12 2 PRICES OF USED VEHICLES IN THE U.S. Abstract This paper aims to determine not only what factors that are most predictive of used vehicles prices in the United States, but also subtle factors customers should be aware of while researching used car. In all the new cars it has become a norm to have features like back-up camera, various parking sensors and blind spot monitoring. A first-time car buyer may consider these when they buy their used vehicle besides mileage and cost. Our research has found that… So, the conclusion is… …Summary of how we conducted the analysis…. Summary of Why we wrote the pater…. Summary of results 3 PRICES OF USED VEHICLES IN THE U.S. Introduction While there are well-known factors that drive the price of a used car (e.g. model year and mileage), the average customer does not know the extent to which those factors play in the price of a used car and how secondary factors should be evaluated for a successful research. Car features have evolved over time and certain technological features that were considered a luxury some years ago can now be found standard on many car models. As a result, a price framework that held true many years ago may no longer be valid today. As most people don’t buy a new car frequently, it is important to have a current model that shows which factors influence used car prices in today’s market. Determining what a fair price is for a used car could be done by comparing to similar models which are sold through a similar channel. The channel can have an influence as buying from a dealership could have a price difference compared to buying from a private owner. For someone who is interested in buying a used car, it will be very useful to have a framework which shows the contribution of different variables to the final price of the car. This research aims to determine how certain variables will affect used car prices in today’s market. 4 PRICES OF USED VEHICLES IN THE U.S. Market of Used Cars When buying a car, a customer has the choice of purchasing a new car from a dealership or to buy a used car in the used car market. According to data from Statista (2019), the used car market has represented most car sales in all the years between 2000 and 2018. Because most car sales are in the form of pre-owned vehicles, this research is important as it aims to determine variables which influence price in this market. In 2018 over 40 million used cars were sold in the USA, compared to only 7.21 million new cars. 5 PRICES OF USED VEHICLES IN THE U.S. Figure 1. Number of new and used light vehicle sales in the USA from 200 to 2018. Retrieved from Statista. Copyright Statista 2019. In the new car market, pricing is more straightforward as it is set by the manufacturers. In the used car market, the original price of the car when it was new plays a role but in addition many other variables will also influence the used car price. The internet has become an important tool for buying and selling used cars. Traditionally one had to buy from used car dealerships or looks for advertisements in newspapers or magazines, but the internet allows for far more transparency in the used vehicle market. It allows potential customers to look beyond their regional offerings. A study by Haan & Boer (2010) in the Netherlands aimed to determine if there were any regional differences in price before the internet and if the internet has made those regional differences disappear. They found that differences of up to 15% existed in prices but these disappeared after the rise of the internet. Another characteristic of the used car market is the concept of haggling and price negotiating. The sticker price for a car is often just a starting point for a lengthy price negotiating process. Many people dislike this aspect of buying a new car and as a result certain dealership that employ a no haggling policy, such as Carfax, have become increasingly popular (Huang, 20019). Many online dealerships now post a firm price, but this is also becoming common with private sellers who do not want to spend time negotiating with all the potential buyers. Knowing what the true market value of a car is allows a customer to negotiate better. According to Erdem and Senturk (2009), the main determinant for the price of a used car will be production year. In addition, they identified other significant determinants such as country of manufacturer, cylinder volume, number of services, type of transmission and if the car has a sunroof. A study by Autotrader (2009) on their used car data, showed that the main 6 PRICES OF USED VEHICLES IN THE U.S. variables to influence a car’s resale value are mileage, brand reputation, car condition, maintenance and brand reputation. Purpose Statement Pretty much a summary of all previous sections (excluding abstract) and a restated WHY we are doing this (smoothly connecting to the next section) The public transport system in almost all the major cities in the United States is difficult to rely on. It is three times faster to travel via personal vehicle as compared to public transport except in rare cases like New York. This leads to the necessity of owning a personal vehicle to prevent depending on the slow public buses or trains. It becomes ever more difficult for people living in small towns and villages as there is almost non-existent public transport. Since there is a need for people to own a vehicle, not everyone is able to afford to buy a brand-new car with all the bells and whistles. This then leads to the problems of dealers trying to force the customers into buying cars that are not worth its cost. Trying to find the right car for the right price along with the additional requirements is challenging. Our research tries to determine the cost and sale of used vehicles based on various features of the car besides the mileage and model year. Research Question There main question our paper aims to answer is: “What key indicators--beyond major factors such as model year and mileage--determine the price of used vehicles in the USA and how they are important to customers looking to buy a used car?”. In this paper, we are analyzing multiple factors that bla bla bla. 7 PRICES OF USED VEHICLES IN THE U.S. Research Questions (does not need to include a hypothesis), but there obviously must be at least three. Method(s) of Analysis Data Collection Method With the advance and accessibility of Internet, dealers across United States can easily publish their inventory data not only to their own websites but also to marketplaces where the traffic and concentration of users are much higher. After a thorough analysis of different marketplaces to collect data, the following criteria was used to…: 1. Sdfsdf 2. sdfsdf Data Analysis Method Multiple linear regression is the major method of the analysis of this paper, since this report …. bla bla bla. I’ll put an image here. (Figure 1) Descriptive statistics of each variable…bla blab la... These indicators will ……blab la Discussion of Findings I’ll enter some exploratory analysis here splitting primary factors and secondary factors and explain why they are important to the following section Descriptive Statistics 8 PRICES OF USED VEHICLES IN THE U.S. Descriptive statistics of our data set ….bla bla….We analyzed total X variables for our research paper and the below table (Figure 1) shows the descriptive statistic values of all these X variables, which were generated through R. IMAGE 2 Figure 1: Descriptive Statistics Figure 1 illustrates that…. bla bla ba... RStudio output: As we can see above, adjusted R-squared is XXX, which means that XX.X% of variation in the price of used vehicles in the US are explained by the independent variables that are present in the regression model…. Price of Used Vehicles in the US = − X.91 + Y + ZxW Enter secondary factors analysis. Conclusion and Recommendations Paragraph on conclusion…bla bla Paragraph on recommendations to customers researching used vehicles in the United States. 9 PRICES OF USED VEHICLES IN THE U.S. References ERDEM, C., & ŞENTÜRK, Đ. (2009). A Hedonic Analysis of Used Car Prices in Turkey. International Journal of Economic Perspectives, 3(2), 141-149. Factors that Influence Depreciation and Resale Value. (2009). Retrieved from https://www.autotrader.com/car-reviews/factors-influence-depreciation-and-resale-value34513 Haan, M. A., & Boer, H. D. (2010). Has the Internet Eliminated Regional Price Differences? Evidence from the Used Car Market. De Economist, 158(4), 373-386. doi:10.1007/s10645-010-9151-4 Huang, G. (2010). Posted Price and Haggling in the Used Car Market. SSRN Electronic Journal. doi:10.2139/ssrn.1805298 U.S. new and used car sales 2018 | Statistic. (2019). Retrieved from https://www.statista.com/statistics/183713/value-of-us-passenger-cas-sales-and-leasessince-1990/ 10 PRICES OF USED VEHICLES IN THE U.S. 11 PRICES OF USED VEHICLES IN THE U.S. Appendices Variables Table Descriptive Statistics from Excel R programming: 12
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