Thursday, January 30, 2020

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.


Tuesday, January 21, 2020

JustAutoValue lets Users Experiment with factors Impacting Pre-owned Vehicle Prices

Vehicle Trim


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All other factors remaining 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).


Vehicle Warranty



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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 65K miles while the other one with 55K. 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 $23K (orig. MSRP $34.9K+/-), while the other with the remaining Powertrain warranty would fetch over $26K, proving a difference of at least $3K in current value, resulting solely from the remaining warranty.


Vehicle Ownership



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Though the two vehicles are identical (2010 BMW 528i) here, one has one owner while the other has three. The latter faces a lower a 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.


Other Factors



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The graphics above prove that the "Other" factors like ownership, service history, garage/parking type, routine maintenance and overall condition make a significant difference in prices, due primarily to the availability of the online data (CarFax, Vin History, etc.), comparative marketing sites (Cars.com, CarGuru.com, etc.), and emerging instant valuation sites like JustAutoValue.com.


Location Arbitrage



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When the current prices of two identical M-series Mercedes are compared across two geographic markets - West and South - an attractive location arbitrage emerges, due largely to the differences in cost of operations (e.g., the cost of operating a dealership in the Bay area is expected to be considerably higher than those in the competing South). Of course, for an average consumer, the cost of transportation and logistics vastly lessens the economic allure.

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').

The above sample graphics are extracted from 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:

Friday, January 3, 2020

Pricing Pre-owned Auto Markets – A Honda Accord Case Study

Pricing "Mid-Age" Model --  2010 Accord Case Study

Alongside Toyota’s Camry, Honda’s Accord has been immensely popular in the mid-size segment, for over twenty years now. The reliability of the Accord has paid big dividends among its loyalists, always willing to lend a hand to their favorite car to remain on the top-10 lists of almost all major auto magazines ever since. Accord consistently fetches one of the highest resale values in the mid-size segment.

The 2010 Accord came in three primary trims: LX, EX and EX-L, with EX leading the production and sales. EX-L represented the top of the line with a V6 engine, sunroof, upgraded audio, leather and a luxury power pack. Even at the bottom of the Great Recession, over 280K 2010 Accords were sold, although 350K-390K used to be the norm prior to the recession. 

Modeling Step 1 (Correlation Matrix)

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The above correlation matrix sets the table for modeling. Dealer Price (abbreviated here as Dealer Pr) has the highest (negative) correlation with Miles. The negative correlation coefficient signifies that higher mileage dampens the dealers’ asking prices in the market.

The Trim-Package variable demonstrates the second highest predictive relationship with the dependent variable, i.e., the Dealer Price. The binary Sunroof variable is the next best predictor but its demonstrably high multi-collinearity with the Trim-Package forces it out of the modeling equation, leaving Trim-Package to stand on its own in the model. Accident is the other important binary variable in the modeling queue, with extremely low collinearity with the other independent variables. Finally, the prior ownership (“Owner”) is another predictor of the dealer price. Owner is a linearized 4-category variable with 1-owner receiving the highest rating followed by 2, 3 and 4 owners, respectively.




The above scatter graph depicts the negative relation between Dealer Price and Miles. Prices generally decrease commensurately with the increasing mileage. With trimming of some outliers, the fit would tighten, moving the R-square up to a more customary level. 

Modeling Step 2 (Multiple Regression Analysis)




The above MRA output confirms the transition of Miles from the negative predictive relationship in the correlation matrix to the negative contribution to the predicted price. Trim-Package is the most important independent variable (highest t stat and lowest P-value), followed by Accident, Owner and Miles. The model R-square – 0.96809697 – is reasonably high, with potential for even higher R-square if the model is rerun without the outliers.

To interpret the MRA model coefficients, better Trim-packaged models – EX-L and EX – have higher demands than the baseline LX model. Consumers prefer Accords that have not had any reported damages or accidents, while the one-owner units are preferable to those owned by multiple people. Also, as expected, a typical buyer is expected to pay a lesser price for a high mileage Accord.   

Modeling Step 3 (Analysis of Model Estimates)




The above percentile graph shows that the dealer prices and model estimates are divergent up to the 25th percentile, beyond which the dealer prices and model estimates start to converge. 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. 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. Since the private sellers frequent the mid-age market, model estimates would help them properly price their subjects as well.  




The model is predicting even higher (than the asking) prices for the top-of-the-line EX-L package, 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 version (assuming, of course, that the combined EX/LX 65% in this sample represents the actual rollout too). This is a common strategy manufacturers follow to keep the MSRPs low, thereby enticing a broader base of customers. Again, by having access to model estimates, dealers would be alerted to the potential under-pricing of the EX-Ls. Conversely, they would be warned of the over-pricing the other 65%, particularly the baseline LXs.




The Accident variable provides an excellent customer protection, safeguarding those who are particularly risk-averse. While the Model is agreeing with the dealer pricing for the vehicles without any reported damages/accidents, the dealers are however way over-pricing the Accords with the reported damages/accidents. Therefore, by having the model estimates placed alongside the dealer prices, consumers can save on average $2,500 (10,995 – 8,485), a wow savings and the true protection from over-pricing.

Nowadays, vehicle data reports like CarFax* and AutoCheck* are readily available in the pre-owned market, instantly alerting buyers shopping on-site or online of the many noteworthy issues like title, safety, accident, odometer, prior ownership, etc.
     



While the Model is confirming the dealer prices for the prior 1 and 2-owner Accords, the dealer prices are nonetheless considerably higher than the model estimates for 3 and 4-owner ones, thus significantly disadvantaging average consumers. Only the extremely knowledgeable consumers would be aware of the differences in prices at this level of detail. Thus, 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 above Miles table shows the price comparison by breaking down the mileage into four equal quartile groups. The Model is revealing that the dealer prices for the two lower mileage categories are significantly above the market, though their prices in the highest mileage category are well below the market. Therefore, having access to the model values would help dealers price their inventory more accurately, without having to depend on the transposed prices between these two compensating groups. The lure of lower mileage vehicles 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 that the fact that the West Coast market is seriously overpriced. Of course, considering that West Coast is not the typical Accord country, this price imbalance could be temporary, resulting from (temporary) shortage of supplies. Conversely, the South and Midwest markets are somewhat under-priced.





When the Model identifies the over-priced ones, it’s pointing to a silver lining, meaning “potential” savings. If the model values were to be reported alongside the dealer prices, buyers would immediately know the extent of potential savings. Earlier, the Model had identified the factors – baseline Trim, Accident on record, multiple prior Owners and high Mileage – that significantly lower the value of this mid-age Accord. The above over-priced data sample confirms exactly that. SL # 6 is the only one without an accident report, however satisfying the other conditions. SL # 7 and 9 units, despite accidents, have managed to maintain higher values due to the top EX-L trim, single ownership and relatively low miles.




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. While dealer prices range between $12,995 and $13,998, the Model has been predicting a much higher range – low-to-mid $15K. As the Model has already identified, dealers have been under-pricing their cream of the crop Accords, meaning the one-owner, accident-free, low-mileage, top-of-the-line EX-Ls. Again, the above under-priced sample proves the accuracy of the model.  Now and then, the dealer prices could consciously be lower as the minor negatives are not captured in the modeling database. At any rate, it would be a conscious decision on the dealer’s part listing a lower (than the model estimate) price. SL # 2 and 3 – the two low-mileage top-notch EX-Ls – could fall into the aforesaid group.

Considering the high reliability and rock solid loyalty, the 2010 Honda Accord has been one of the most sought after mid-size models on the pre-owned market today. 

COPYRIGHTED MATERIAL


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'). Also, try our Free and Mobile-friendly Auto Valuation site JustAutoValue.com.


Sunday, December 15, 2019

Pricing Pre-owned Auto Markets – 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.

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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 ...