Friday, May 31, 2019

JustAutoValue shows how One-Owner Vehicles Narrow the Competition down

(Click on the image to enlarge)

Though the two vehicles are identical (2010 BMW 528i) here, one has one owner while the other has three. The latter faces a lower market price by roughly $2K. 

The issue of one owner vs. multiple owners is more a psychometric hypothesis than a true econometric (market-derived) one. In other words, potential buyers tend to feel more at home with one-owner vehicles than multi-owner ones, under the impression that the former are better-cared-for than the latter. 

Likewise, the dealers of late model vehicles often price their inventory higher than their rental counterparts, making a similar case.

Those who are into data science or modeling can learn more about it from my recent book "Pricing Pre-owned Auto Market - A Hedonic Modeling Approach" available on Amazon (search "Sid Som's Books" or use the link below) or Payhip (PDF).

I produced the above sample valuations using JustAutoValue.com as I own and operate the site, to avoid having to deal with any copyright issues. The site produces these valuations in less than 30 seconds each. It's mobile-friendly so no additional Apps are needed. Moreover, It's totally FREE and NO login/registration of any sort is required. Nearly 90 Major Brands are currently covered.


Just click on the Brand of your choice on our homepage and follow the prompt. If you need help, use 'TRY IT' from the homepage. Here is the link to JustAutoValue.com:

Wednesday, May 29, 2019

JustAutoValue Shows how Remaining Warranty makes big difference in Vehicle Prices

(Click on the image to enlarge)
Ceteris paribus, vehicle Warranty - even the remaining Powertrain - makes a significant difference in comparable prices. Let's compare the probable current prices of two identical 2014 Ford Explorer XLTs, in terms of features and add-on options. The only difference in this illustration is the actual mileage on the odometer: one with 66K miles while the other one with 58K. Since the Powertrain warranty back then used to cover 60 months or 60K miles, the former would be out of warranty today while the latter would still be covered.    

The 2014 Ford Explorer XLT without the Powertrain warranty would be priced at roughly $21K (orig. MSRP $34.9K+/-), while the other with the remaining Powertrain warranty would fetch about $24K, proving a difference of $3K in current value, resulting solely from the remaining warranty.

I used JustAutoValue.com to create these sample valuations as I own and operate it, to avoid any copyright issues. It takes less than 60 seconds to generate a "quick look" valuation. The site is mobile-friendly so no additional Apps are needed. Try out your own subject pre-owned Car, SUV or Pickup. It's totally FREE and NO login/registrations of any sort is required. Nearly 90 Major Brands are currently covered.

Just click on the Brand of your choice on our homepage and follow the prompt. If you need help, use 'TRY IT' from the homepage. Here is the link to JustAutoValue.com:

Sunday, May 26, 2019

JustAutoValue Shows how Vehicle's Trim Alone Makes a Significant Difference in Price


(Click on the image to enlarge)

Holding all other factors constant, vehicle's Trim alone makes a significant difference in comparable prices.

While the 2012 LE (in the above example) would be priced at roughly $14K (orig. MSRP $22.6K+/-), the comparable XLE-V6 would fetch roughly $19K (orig. MSRP $30K+/-), nonetheless pointing to a fairly similar decay in prices (meaning Current Price to MSRP).

JustAutoValue.com produced these sample valuations in less than 30 seconds each. The site is mobile-friendly so no additional Apps are needed. Try out your own subject pre-owned Car, SUV or Pickup. It's totally FREE and NO login/registration of any sort is required. Nearly 90 Major Brands are currently covered.

Just click on the Brand of your choice on our homepage and follow the prompt. If you need help, use 'TRY IT' from the homepage. Here is the link to JustAutoValue.com:

Saturday, May 25, 2019

Pricing Model for a Semi-Late Model Vehicle -- A Nissan Altima Case Study

Pricing Model for a Semi-Late Model Vehicle

-- 2014 Nissan Altima Case Study --

Altima has been Nissan’s bread and butter mid-size sedan for over a decade, competing with other popular mid-size brands like Toyota Camry, Honda Accord, Hyundai Sonata, Chevrolet Malibu, Ford Fusion, and a host of others. Nissan sold a record 335K in combined Altima brands in 2014, rising from a mere 203K at the bottom of the last recession in 2009. 

The 2014 Altima came in two primary engine configurations: 2.5L I4 16V and 3.5L V6 24V, with the SL Trim topping both lines. While the 3.5 SL represented the hallmark of luxury for Altima with V6 engine, moonroof, upgraded Bose audio, leather interior and a luxury power pack, the 2.5 complex (2.5, 2.5 S, 2.5 SV & 2.5 SL) collectively led the overall production and sales volume. Of course, the moonroof, Bose audio and leather were available as factory options for the 2.5 SL as well.

The modeling sample, therefore, comprises of the 2.5 and 3.5 SLs only.


Modeling Step 1 (Correlation Matrix)



As indicated before, the correlation matrix sets the table for modeling. As expected, the Dealer Price (abbreviated here as Dealer Pr) has the highest (negative) correlation with Miles, signifying that the higher miles generally dampen the dealers’ asking prices in the market.

Though Warranty is the next best predictive variable, it’s extremely high collinearity with Miles (-0.8792) makes it an insignificant variable, leaving the latter to solely represent the entire mile-related complex. As all warranties are primarily tied to the mileage (and secondarily to the number of years/months), their collinearity is observably inseparable. For instance, the original factory warranty covered the car bumper to bumper for 3-years/36,000 miles, Power-train warranty covered engine and transmission for 5-years/60,000 miles, and the factory Certified (for the pre-owned vehicles) warranty extended the Power-train to 7-years/100,000 miles.    

The Trim variable demonstrates the third highest predictive relationship with the dependent variable. Though Trim has a high collinearity with the Moonroof variable, the latter would still be tried in the model considering the limited pool of independent variables.

Unlike the older and mid-age models, Service history (Service) is usually an important consideration in purchasing late model vehicles as buyers are forced to pay up to 70% of the original MSRP for the well-maintained ones. Service is therefore a new variable which shows significant predictive promise, though somewhat correlated with Owner and Accident.

Accident is the other important predictive variable in the modeling queue, with low multi-collinearity, except for Service. Moonroof and the prior ownership (Owner) will be the other predictors in the MRA model. While prior ownership – particularly original ownership – is generally an important variable in predicting prices of the older and mid-age models, it is nonetheless much less significant for the late models as the vast majority of late model cars have single owners, thus making the variable more predictable and less disparate. The lack of distribution makes it significantly weaker.




The above scatter graph depicts the negative relationship between the Dealer Prices and Miles. Prices generally decrease commensurately with the increasing mileage. Of course, the fit would tighten with some outliers removed, thus paving the way for a higher R-square, perhaps up to a more customary level. 


Modeling Step 2 (Regression Analysis)



The model R-square – 0.976608347 – is reasonably high, with potential for even higher R-square if the model is rerun without the outliers.

The above MRA output confirms the negative contributory relationship between Miles and the dependent variable, meaning higher miles are negatively contributing to the predicted prices. Though the Miles coefficient is seemingly small, it will nonetheless have significant impact on cars with high mileage; for example, the predicted price of a 2014 with 70,000 miles will be reduced by -$3,221 (-0.04601892 * 70,000), as opposed to -$920 for a competing Altima with only 20,000 miles on it.

Accident, in sharp contrast to a lower correlation coefficient, stands out as the most important independent variable (highest t stat and lowest P-value) in the model followed by Trim and Miles. The reason Accident is so prominent in the model is that it provides the maximum price differentiation between the two groups of cars – accident-free vs. accident-encountered. Simply put, the future owners of near new cars are mostly risk-averse, negotiating significantly lower (discounted) prices for the cars that have encountered damages and accidents. Accidents, often resulting in physical damages, are not covered by the factory warranty which covers manufacturing faults only.

To interpret the other MRA model coefficients, the higher Trim model – 3.5 SL – is contributing more to the model estimate than the lower 2.5 SL Trim. Additionally, single ownership (Owner) and better serviced vehicles (Service) are preferred while Moonroof adds to the model estimate as well. Again, higher miles and accidents have recognizably negative impacts on model estimates.    


Modeling Step 3 (Analysis of Model Estimates)



The above percentile graph shows that the model estimates are significantly lower at the bottom end of the curve, zigzagging between the 25th and 50th percentile, and are confirming the dealer prices on the long end of the curve. The fact that the model has been predicting lower prices at the bottom end of the curve points to the above-the-market asking prices for the lower end units, perhaps those with accidents on record. On the other hand, this additionally proves that the model estimates could help both consumers and dealers to quickly converge on the same page as these estimates are independently derived. Likewise, the private sellers can validate their subject prices before accepting the trade-in values from the dealers.  




The model is predicting even higher (than the dealer) prices for the top-of-the-line 3.5 SL Trim, signifying that the market is ready to withstand higher prices for the more robust V6 engine with factory-installed power and cosmetic upgrades, even though the manufacturer sells a disproportionately higher volume of the lighter 2.5 SL version (assuming, of course, that the 2.5 SL’s 63% presence in this sample represents the actual rollout too). While the dealers are under-pricing the high-end low-volume 3.5 SLs, the model estimates are signaling the possible over-pricing of the 2.5 SLs.

The original average MSRPs for these two models were $27,920 and $30,820, respectively, pointing to ironic 56% and 49% decays in respective values.




Considering these are the late model cars without any significant exposure, the cars with reported damages/accidents comprise a low 13%.  While the Model is agreeing with the dealer pricing for the vehicles without any reported damages/accidents, the dealers are however way over-pricing their fleet of Altimas with the reported damages/accidents. Therefore, by having the model estimates placed alongside the dealer prices, consumers can save on average $4,549 (15,029 – 10,480), a truly wow savings and a great firewall protection from dealers’ over-pricing.




The major car rental companies usually start withdrawing their fleets as they approach 2 years and/or 30-40K miles, to avoid having to deal with questionable rentals. As of this writing (6/2017), only one major rental company had the 2014 inventory on sale (while others have been selling 2015 and 16) which is reflected in the sample. The above graphic shows the rental car sales are more aggressively priced than the competing dealer inventories. Even the model is showing an average savings of $1,500. Knowledgeable consumers are generally aware of this potential savings and use them as direct comps while negotiating with the dealers. Again, having the model estimates available side-by-side the dealer prices would protect average consumers and ease deal-making by eliminating all unnecessary price haggling back and forth.




The presage by the correlation matrix that a better serviced car is more likely to fetch a higher price is now emphatically confirmed by the model. The lesser maintained cars fetch bottom of the barrel prices. Of course, those cars tend to have higher miles (as shown above), disproportionately more accidents, lower order trims and sometimes multiple owners even during this short stint.




The above Miles table shows the price comparison by having miles broken down into two (equal) halves. Ceteris paribus, the lower mileage group is slightly over-priced, while the higher mileage group is appropriately priced. The lure of very low mileage vehicles (not shown here) is forcing consumers to pay an unwarranted premium which could be avoided if the model estimates were also published alongside the dealer prices.




The above table proves that the location arbitrage is virtually non-existent nationally, other than the fact that the West Coast market, though inadequately represented, is seriously overpriced. Of course, considering that West Coast is not the typical Altima country, this price imbalance could be temporary, resulting from (temporary) shortage of supplies.




The above graphic is suggesting why the Moonroof is such a highly sought after option. While it is standard in 3.5 SL sedans, it is an option for 2.5 SLs – needless to say, a worthwhile option indeed. The Model is predicting $3,000 lower value for the vehicles that are unequipped with Moonroofs.   




When the Model identifies the over-priced vehicles, it’s pointing to a silver-lining, uncovering “potential” savings. If the model estimates were to be reported alongside the dealer prices, buyers would immediately know the extent of those potential savings. The above data sample demonstrates that the dealers are way over-pricing the accident-free 2.5 SLs that are still under Full (3-year/36K miles bumper-to-bumper) factory warranty (e.g., SL # 1, 3, 7 and 9), followed by the factory Certified (7-year/100K Powertrain) units (e.g., SL # 8 and 10).




Alternatively, when the modeling process identifies the under-priced cars, it’s pointing to some “upfront” savings for the consumers. This is an area where dealers would be most benefitted if they were to subscribe to the model estimates. The above sample shows that the dealers are generally under-pricing the good (accident-free and under warranty) 3.5 SLs. Again, the above under-priced sample proves the accuracy of the model. As indicated in the previous chapter, now and then, the dealer prices could consciously be lower to factor in some minor negatives (not captured in the modeling database) or to address some imminent psychological breakpoints. SL # 8 could be one such psychological case where the dealer might have consciously lowered the price as the vehicle is on the verge of running out of the 60K Powertrain warranty.

Considering the ever-escalating popularity of the Nissan Altima brand, the 2014 model has been one of the most sought after mid-size late models on the market today.


Thursday, May 9, 2019

Pricing Model for an Older Vehicle - A Ford Mustang GT Case Study

Ford Mustang GT (Model Year 2010)


When it comes to affordable sports cars, Americans’ love affair with the Ford Mustang family knows no bounds. Mustang’s 2010 GT coupe, encompassing its fifth generation design, muscular 315 HP, 4.6L V8 engine with a manual transmission, offered sports car lovers a scintillating and awe-inspiring choice and experience, leaving a big portion of the competition far behind.

While the standard GT package provided for 5-speed manual transmission, leather appointment, advanced power package, climate control, heated mirror, eight-speaker entertainment, Bluetooth, etc., automatic transmission, glass roof, convertible accessory and read video camera were popular options. Also, 3-year/36K miles basic and 5-year/60K miles drive-train with roadside assistance were standard warranties.

Modeling Step 1 (Correlation Matrix)

(Click on the image to enlarge)

The above correlation matrix demonstrates that the Dealer Price (Dealer Pr) has the highest (negative) correlation with Miles, meaning the higher miles on the vehicles tend to dampen the dealers’ asking prices in the market.

Mustang GT Convertibles have more positive impact on the price than the regular coupes. While the GTs without any reported accidents (Accident) are expected to fetch higher price than their counterparts, the high mileage ones would be adversely impacted due to their high negative collinearity with Miles. Likewise, the single owner (Owner) GTs would do better price-wise than their counterparts. Though the better maintained GTs (Service) are expected to have positive effect on price, its high multi-collinearity with Miles and Accident would drain its impact. Warranty is virtually uncorrelated with price.   




The above scatter graph depicts the usual negative relationship between the Dealer Prices and Miles. Prices generally decrease commensurately with the increasing mileage. Thus far, this graph is the only one that has demonstrated somewhat logarithmic (non-linear) relationship; nonetheless, this fit would be much tighter with the trimming of some outliers, thus paving the way for a much higher R-square, perhaps to a more customary level. 

Modeling Step 2 (Multiple Regression Analysis)




The model R-square – 0.9595472 – is reasonably high, with potential for even higher R-square if the model is rerun without the outliers.

The above MRA output confirms the negative contributory relationship between Miles and the dependent variable, meaning higher miles are negatively contributing to the predicted prices. Though the Miles coefficient is seemingly small, it will nonetheless have reasonable impact on cars with high mileage; for example, the predicted price of a 2010 GT with 100,000 miles will be reduced by -$2,429 (-0.024289 * 100,000), as opposed to a mere -$486 for a competing one with only 20,000 miles on it.

Accident is the most important independent variable (highest t stat and lowest P-value) in the model followed by Convertible, Owner, Service and Warranty. Again, the standout presence of Accident points to the fact that it provides the maximum price differentiation between the accident-free and accident-encountered groups. Simply put, the future owners of these fairly late model sports cars are most likely risk-averse, and as a result are unwilling to pay the high market price either for the high mileage cars or those that have encountered major damages or accidents.

To interpret the other Model coefficients: Convertible GTs are retaining more value than the regular coupes; the single owner vehicles are preferred to multiple owners’; the well-maintained cars provide the necessary peace of mind for the buyers as they are willing to pay for the good service (service maintenance by the manual, garage kept, etc.), while any warranty services are enhancing predicted prices.

The MRA Model is confirming the presage of the correlation matrix that Service and Warranty are the two least contributing predictors. Again, higher miles and accidents have perceptibly negative impacts on predicted prices.    

Modeling Step 3 (Analysis of Model Estimates)




The above percentile graph shows that while the model estimates are significantly lower at the bottom end of the curve (5th and 10th), they are however in tandem between 25th and 90th, though diverging slightly at the 95th. The fact that the model has been predicting lower prices at the bottom end of the curve points to the above-the-market asking prices for the lower end units, perhaps those with multiple incidences – accidents on record, multiple ownership, inadequate maintenance or high mileage.

On the other hand, this additionally proves that the model estimates could help both consumers and dealers to quickly converge on the same page as these estimates are independently derived. Likewise, the private sellers can validate their subject prices before accepting the trade-in values from the dealers, considering that these are generally high-priced sports vehicles and local comps could be few and far between.    




The above Warranty table shows that while the dealers are over-pricing the vehicles without any warranty (None), they are however under-pricing the vehicles under warranty – factory re-certified (Certified) or those with in-house (Dealer) warranties. Specifically, they are significantly under-pricing Certified and Dealer warranty vehicles roughly $1,550 and $1,000, respectively. On the other hand, the Model is showing that the Vehicles without any warranty are the least preferred, thus predicting roughly $700 below the current asking. Interestingly, the vehicles with the dealer warranty have the highest mileage – 28K more than the Certified inventory.




While the Model is confirming the dealer pricing for the fleet without any reported accidents (None), the dealers are however way over-pricing the ones with the reported accidents (Yes), even those with the minor damages. Therefore, by having the model estimates placed alongside the dealer prices, consumers could save on average $3,916 (16,465 – 12,549) and $1,434 (15,749 – 14,315), respectively. More troublingly, the mileage difference is incredible between the yea and the nay categories.




The Model also proves that the one owner vehicles are expected to fetch premium prices, though the dealers are pricing the 2-3 ownership cars higher than the original owners’ with fewer miles. Vehicles with 4+ owners are also priced above the market. Again, this transposition of prices could be avoided if they were to subscribe to some legitimate model values. Moreover, in this internet day and age, by having the model estimates available side-by-side the dealer prices, dealers would protect average consumers as well as their reputation and thus ease deal-making by eliminating all unnecessary price haggling back and forth.




Though the dealers are asking more or less the right market price for the well-maintained vehicles, they are however asking $2,500 more for the vehicles with sub-par service history. Needless to say, absent some model values alongside the dealer prices, buyers would continue to overpay for the lesser maintained vehicles. Therefore, this industry needs to be reinvented by having to publish a set of independent model values side-by-side the dealer’s asking prices.




The above Miles table illustrates the price comparison by having miles broken down into four (equal) quartiles. While the Model is forecasting the inverse relationship between the predicted prices and mileage, dealers’ asking prices are not too far off, either. Dealer prices in the low mileage quartile are somewhat higher than the model estimates, apparently stemming from the lure of the low mileage vehicles. The fact that the consumers are forced to pay an unwarranted premium could be avoided if the model estimates were also published alongside the dealer prices.




The Model is proving that the location arbitrage is virtually non-existent nationally, though the West Coast dealers are asking somewhat higher prices than the corresponding model estimates. The reason the Model is estimating the lowest prices for the West Coast cars is the highest average mileage on those vehicles; for instance, West’s average mileage of 69,904 is significantly higher than Central’s 50,428 or East’s 52,897 while the price gap narrows between West’s and South’s due to the tapering of their respective mileages.




The Convertible GTs (Yes), along with their lower mileage, are fetching premium prices than the regular coupes. While the Model is predicting even higher prices for them, it is lowering the threshold for the competing regulars. Of course, the Convertible was an option for the new 2010 GTs with a MSRP of $33,395, as compared regular GT coupe’s $28,395. A part of the original premium might still be carrying over.

Of course, when the comparisons are not necessarily apples-to-apples, normalized metrics are in order. Decay in value could be one such metric. Applying the above figures, the Convertible has lost 34.50% (33,395-21,883)/33,395 in value off the original MSRP while the regular coupe has stacked up ever higher decay, i.e., 40% (28,395-17,067)/28,395.




The above data sample demonstrates that the dealers are randomly over-pricing the GTs given the general paucity of the late models. Unlike the previously researched Makes/Models where the dealers were routinely over-pricing the vehicles with the reported accidents, the GTs are seemingly all over the map, so to say. 

Here is a quick breakdown of the sample:

5 (50%) vehicles have no record of accidents;
5 (50%) vehicles had 2 prior owners;
6 (60%) vehicles have ‘Excellent’ service history;
7 (70%) vehicles have under 60K miles (drive-train);
8 (80%) vehicles have no warranty (yet over-priced);
9 (90%) vehicles are regular GT coupes (yet over-priced).

If the model estimates were to be placed alongside the dealer prices, buyers would immediately know the extent of the over-pricing. Ironically, the worst sample case SL# 1 (No Warranty, Accident, 4 Owners, Low Service Maintenance and Highest Mileage) is the most over-priced!




When the modeling process identifies the under-priced cars, it’s pointing to some “upfront” savings for the consumers. This is an area where the dealers would be most benefited if they were to subscribe to some model estimates. The above sample shows that the dealers are perhaps (because not a scientifically-drawn sample) under-pricing their cream of the crop: Accident-free vehicles (100% in this sample), with the widest spreads attributed to those that are additionally backed by excellent service history (90%), 1-to-2 prior ownerships (80%), warranties (50%). higher value convertibles (40%) and lower mileage (30%).

As indicated before, now and then, the dealer prices could consciously be lower to factor in some minor negatives (rarely captured in the modeling database) or to address some imminent psychological breakpoints. SL # 1 could be one such psychological case where the dealer might have consciously lowered the price (2nd lowest price) as the vehicle is on the verge of reaching 100K miles, a big psychological milestone.

Given the everlasting popularity of the Ford Mustang family of sports cars, the 2010 GT model has steadfastly remained one of the most sought after “affordable” late model sports cars on the market today.

Copyrighted Material

Wednesday, May 1, 2019

A "Quick Look" Auto Valuation Site must be Mobile-friendly, Working as an App as well

How Mobile-friendly JustAutoValue.com Looks and Works as an App on iPhone
http://www.justautovalue.com/


Most Websites are built on the old web technology so they are not mobile friendly, needing separate Android or iOS Apps. 

JustAutoValue.com is mobile-friendly so it does not require any special Apps. From your smart phone, just access internet and type in the URL as you would from your laptop or desktop and you would be using the site as if it were an App. 

JustAutoValue.com produces simulated pre-owned auto valuations in 30 seconds or less. Try out your own subject vehicle. It's totally FREE and NO login/registration of any sort is required. 80+ Major Make/Models are currently covered. 

Just click on the Model of your choice on our homepage and follow the prompt. If you need help, use 'TRY IT' from the homepage.


Homequant@gmail.com
JustAutoValue.com is owned by Homequant, Inc.

A "Quick Look" Auto Valuation Site must be Mobile-friendly, Working as an App as well

How Mobile-friendly JustAutoValue.com   Looks and Works as an App on iPhone http://www.justautovalue.com/ Most Websites are ...