Introduction

In this investigation, I am going to show that certain aspects of cars can determine the price of a second hand car.

In this investigation, I have made the following hypotheses:

• The price of a new car will decrease the most in the first few years
• There will be a positive correlation between the depreciation and the age
• The make will influence the price of the second hand car
• There will be a positive correlation between the engine size and the price of the second hand car
• There will be a negative correlation between the mileage and the price of the second hand car
• The colour will not influence the price of the second hand car
• The fuel type will not influence the price of the second hand car

The main variables in this investigation that could make a difference on my investigation are the following:

• Make
• Second hand price
• Age
• Engine size
• Mileage

To do this investigation properly, I will need to prove my hypotheses. This will be done by me collecting the data from the database that was issued to us at the beginning of this investigation. I have also looked at sources from websites and car magazines regarding the prices of second hand cars. Second hand car dealers, newspapers and the television also are very useful sources of information. These sources will be very useful as for example the car dealers, they would have a lot of knowledge regarding second hand car sales.

I will be selecting many pieces of data from the database in order for me to work out which aspects of a car will determine the second hand price. Using a vaster majority of cars will help me to see which aspects can change the prices of the second hand cars.

1

65

Ford

Puma

13230

8250

3

silver

1.4

unleaded

29-46

34000

yes

1

66

Peugot

206

9125

7500

1

silver

1.1

unleaded

45-60

18000

yes

1

67

Peugot

406

17490

7500

1

silver

2

unleaded

20-38

17500

yes

1

68

Honda

Civic

12895

7995

1

green

1.4

unleaded

34-50

9500

yes

1

69

Rover

Club

19530

14999

1

grey

1.8

unleaded

26-47

2000

yes

1

70

Fiat

Bravo

10810

4995

2

green

1.4

unleaded

31-53

18500

yes

1

71

Landrover

Dis-covery

27855

13995

1

blue

2.5

diesel

25-34

40500

yes

1

72

Mercedes

Elgance

26425

17500

2

silver

2

unleaded

25-44

22000

yes

1

73

Porsche

Sport

32995

19495

6

silver

3

unleaded

19-38

46000

yes

1

74

Volks-wagen

Beetle

14950

13500

1

silver

2

unleaded

24-41

6500

yes

1

75

Rover

623 GSi

24086

2975

6

blue

2.3

unleaded

25-41

96000

yes

2

76

Suzuki

Vitara

10800

2995

8

red

1.6

unleaded

26-35

50000

no

2

77

Mercedes

Avant-Garde

17915

11750

2

silver

1.6

unleaded

28-50

17000

yes

1

78

Audi

80

17683

3995

7

purple

1.9

diesel

37-60

103000

no

2

79

Volks-wagen

Polo

9960

7550

1

blue

1.4

unleaded

37-59

5000

yes

1

80

Ford

Escort

13183

3495

7

red

1.8

unleaded

29-46

43000

yes

2

81

Ford

Mondeo

17780

7995

4

cuirass

2

unleaded

24-44

30000

yes

1

82

Mazda

Pegasus

10420

2495

7

green

1.3

unleaded

37-58

50000

no

3

83

Rover

416i

14486

3685

6

blue

1.6

unleaded

30-55

64000

yes

1

84

Vauxhall

Corsa

7840

4976

4

red

1.4

unleaded

31-52

21000

no

2

85

Vauxhall

Corsa

7440

3495

6

green

1.2

unleaded

36-55

55000

no

2

86

Ford

Fiesta

6590

1664

10

red

1

unleaded

45-60

37000

no

3

87

Nissan

Primera

13355

2574

9

grey

2

unleaded

27-45

49000

yes

2

88

Citroen

Xantia

14065

2450

8

red

1

unleaded

26-46

49000

yes

1

89

Peugot

Graduat

7600

2497

8

red

1.4

diesel

55-70

71000

no

2

90

Peugot

306

12350

3995

6

white

1.9

diesel

40-61

71000

no

2

91

Fiat

Punto

7518

3769

4

blue

1.1

unleaded

36-60

38000

no

2

92

Volks-wagen

Polo

8710

4693

5

red

1.4

unleaded

37-59

50000

yes

2

93

Vauxhall

Calibra

18675

6995

6

blue

2

unleaded

27-43

63000

no

2

94

Rover

Metro

5495

1995

7

blue

1.1

unleaded

40-58

52000

no

2

95

Rolls Royce

Silver Spirit

94651

14735

9

silver

6.7

unleaded

10-19

70000

yes

2

96

Ford

Escort

15405

3995

5

tormalin

1.8

diesel

29-46

57000

no

2

97

Vauxhall

Astra

9795

3191

6

red

1.4

unleaded

31-50

43000

no

2

98

Renault

19

11695

2748

6

blue

1.9

diesel

39-60

52000

no

2

99

Ford

Escort

9995

2995

6

burgudy

1.3

unleaded

39-54

64000

no

2

100

Vauxhall

Vectra

13435

4995

5

red

1.8

unleaded

30-52

52000

no

2

My first hypothesis was that the price of a car would decrease the most in the first few years. I now intend to prove this hypothesis to be correct.

Firstly I will take the first 3 cars in the age group of 1 year old. I will then work out the depreciation. This will be done by using the formula:

Selling price (second/hand)

                                X 100 =         %        100 -                  =              %

Cost price (when new)

The first 3 cars that I have taken from the database that are in the age group of 1 year old are:

I will now work out the depreciation for each of these cars.

Car1.        7999        X 100 = 50%        100 – 50 = 50%

        16000

Car2.        10999 X 100 = 76%        100 – 76 = 24%

        14425

Car3.        6795  X 100 = 62%        100 – 62 = 38%

        10954

After working out the depreciation for the first 3 cars in the 1 year old group, I have noticed that there is a quite high amount of depreciation for the 1st and 3rd cars. I have noticed that this does not apply to the 2nd car which is a Mercedes A140 Classic. I believe this as the make Mercedes is one that is one of the best known and respected around the car industry. It is also to be considered as one of the best branded cars on the market and therefore, with no disrespect Ford and Fiat their cars are also some of the most expensive on the market. I therefore believe that that is why there is a less depreciation in the Mercedes as opposed to the Ford and Fiat cars. Here is another example:

Car1.        6995        X 100 = 51%        100 – 51 = 49%

        13650

Car2.        3795 X 100 = 28%        100 – 28 = 72%

        13586

As you can see, after 6 years, these two cars have a different amount of depreciation. This is because of the difference in makes. The BMW cars are branded as a ‘higher class’ in comparison to the over cars. This is why, even though the BMW has done 22000 more miles in the same amount of time has a lower depreciation than the Rover.

I will now do the same as before, but with the first 3 cars in the 2 year old group.

Car1.        7999        X 100 = 43%        100 – 43 = 57%

        18580

Car2.        5999 X 100 = 40%        100 – 40 = 60%

        14875

Car3.        4995 X 100 = 56%        100 – 56 = 44%

        8900

Here the first 3 cars are of what would be considered to be the ‘average’ brand. These cars would not immediately be put into the same category as the Mercedes or the Rolls Royce. Therefore as you can see there is a depreciation which is either side of 50%. I would expect the depreciation of cars to be round about 50% in these few years as I believe that the greatest amount of depreciation that I car has is within the first few years. Then I believe the amount of depreciation will slow down and rise at a steady rate.

Now I am going to work out the depreciation of the first 3 cars of the 3 year old group.

Car1.        3999        X 100 = 50%        100 – 50 = 50%

        7995

Car2.        6999 X 100 = 53%        100 – 53 = 47%

        13175

Car3.        5999  X 100 = 53%        100 – 53 = 47%

        11225

Here are 3 more ‘average’ branded cars. They all have depreciation of 50% or just below. As you can see there is quite a high amount of depreciation. I will now expect this level of depreciation to slowly increase. I expect to see that there will not be a huge amount of difference of depreciation between cars that are for example, 4-5 years old.

I will now look at the depreciation of 3 cars from the 4 years, 5 years, 6 years, 7 years, 8 years, 9 years and 10 years old groups.

4 Years old:

Car1.        4999        X 100 = 37%        100 – 37 = 73%

        13610

Car2.        6999 X 100 = 30%        100 – 30 = 70%

        22980

Car3.        7499 X 100 = 56%        100 – 56 = 44%

        13510

5 Years old:

Car1.        3495        X 100 = 34%        100 – 34 = 66%

        10351

Car2.        4700 X 100 = 40%        100 – 40 = 60%

        11800

Car3.        2975 X 100 = 12%        100 – 12 = 88%

        24086

6 Years old:

Another two hypotheses that I made were that the colour and fuel type would not have an effect on the price of a second hand car. I will prove this by comparing 2 cars and their second hand car prices and looking at the colour and fuel type too to see whether they have an effect or not.

As you can see, these two cars have different fuel types. I have noticed that the fuel type does not make a difference on the price of a second hand car. This is because the first car, the Citroen AX Diesel has a depreciation of 83% and the Rover 820 SLi has a depreciation of 82%. Both these cars are the same years old and have the difference between them in there depreciation is marginal. Although they both have different fuel types, it does not seem to affect their second hand prices.    

Here I will compare two cars to prove that the colour of the cars do not determine the second hand prices.

Here I have chosen to cars that are the same in age. The first car, the Rover 623 Gsi has a depreciation of  73%. The second car, the Renault Megane has a depreciation of 70%. As you can see, both have very much the same amount of depreciation give or take a percent or two. They both have different colours too. The first car is green and the second car is blue and yet this does not have the slightest effect on the price of the second hand car.

Evaluation

I have found out that these results all support my hypotheses because they are all from a reliable source and I have used the information well in order for me to support my hypotheses. I also doubt that there could be much I could change if I were to repeat this investigation.