The factors that affect used car prices.

The factors that affect used car prices

Planning

In this experiment we are going to be collecting data in such a way so that it can show us which factors affect used car prices the most and also the least. To give us a vague idea of which were most popular amongst the general public each class member did a survey on every member of their household to see which factors of a car affect them most when purchasing such a vehicle. The results of which are shown below.

As you can see from the table of results the most popular factor was age, however I believe that some of the data could be bias as the people giving the data may have been in a rush at the time or not have put much effort in. In this experiment I am going to try and use as many varying data collection methods to try and get the best of the data that I am going to use.

Hypothesis 1

My first hypothesis is that the higher the first hand price is the higher the second hand price will be, I have recognised that this is quite an obvious hypothesis, however looking at this will be able to show us the anomalies and why they are anomalous and with this data we can see how we can improve our data collection. I am going to first use a scatter graph of new price against old price. I will use all data given to us by the board with a couple of exclusions here and there. I am going to exclude all luxury cars and classic cars. I am also going to exclude all cars with a new price above £20’000 as the factors that affect their price depreciation will change for a more expensive car. For instance a classic cars price could increase with age as its rarity would increase. I am going to be using a scatter graph so that I can fit on all the various pieces of data without generalising anything so that I can point out the anomalies. To finish off, I hypothesise that the higher the new price of a car the higher the old price of a car.

Turn to graphs section for graph.

Analysis of hypothesis 1

As you can see from the graph there is a definite positive correlation mean that the higher the new price the higher the old price. There were however a couple of anomalies, I have pinpointed five and labelled the reasons down below:

This car had an unusually low second hand price in comparison to its first hand price. I looked into it and found a few possible reasons as to why this could be. It was a Vauxhall cavalier, an old and not very popular design anymore, the car was 10 years old with three previous owners, it had 7300 miles on the clock, it had no central locking, airbags or air conditioning. All in all it was an old car with not many pleasure features that could have made it very comfortable and it already had 73000 miles on the clock. All these factors I believe have brought down the price when old.
This car had an unusually high second hand price in comparison to its first hand price. The main reasons for which were as follows. It was a ford focus, a very new car at the time, and very much in demand, it was only two years old with only one previous owner and only 7200 miles on the clock! It had also been serviced. It had five gears, central locking, air conditioning and airbags. All in all it was a young car, very practical and reliable as it was young, it was very popular at the time, and it had lots of comfortable pleasure features, which would have been very appealing in a second hand car.
This next car was a Peugot 206, another car in very popular demand at the time. It also had a very high second hand price in comparison to the new price. It was 1 year old; it was silver, which would have made it look quite new, 1 previous owner, 18000 miles on the clock and 45-60 miles to the gallon! It also had air conditioning and airbags. All pointing towards the same trend as before, pleasure features and good practicality.
This car was an Audi 80, which was not that popular at the time as it was quite an old model. It had a second price much lower than its new price. The reasons for which I believe are as follows, it was purple which is for a very niche market which could make it very hard to get a high price for. It has 103000 miles on the clock! Needs a service. It also has no central locking and no air conditioning. Again no pleasure features and not very reliable, it was also for a niche market because of the colour.

From this we can conclude that, pleasure features such as air conditioning, and practical factors such as central locking are minor but I believe subconsciously quite crucial for a sale. I will take all this information into consideration when choosing my third hypothesis

Hypothesis 2

This is a preview of the whole essay

Hypothesis 2

My second hypothesis is that price depreciation will change with age. We are going to use percentage depreciation instead of difference between new and old price for a very good reason, when using depreciation it puts it into a percentage change, which will mean whether the initial price is huge and then another initial price is small, the price change that will take place will be hugely different, yet the percentage price change could be identical. Using percentage depreciation will make it a much fairer test. I will also be using box and whisker diagrams, this will help to show me where the average depreciation for each year is and whereabouts the range of depreciation lies for each year. I will not be leaving out any cars for this experiment as depreciation will rule out any bias as it means higher new price does not matter as the depreciation to the old price will be the same. To finish off I hypothesise that the older the car the higher the price depreciation will be. I have worked out the percentage depreciation using the following equation.

New price-Old price

New price*100

Below I have shown all of my data that I have used in the second hypothesis, as I said before I have not left any data out as we are using percentage depreciation.

See graphs section for graph.

Analysis of hypothesis 2

This section of the experiment went unexpectedly, it proved my hypothesis wrong and right at the same time, it was very interesting. There were two obvious trends, which I noticed. From one to four years old I noticed that there was a steady increase but the range of prices was still very large and quite varying as you can see from the graph. However as we can see after five years the highest value starts decreasing and the lowest value carries on increasing and so does the median. We can see that as the age increases there is a more specific range of how much the price can depreciate yet when the car is younger then the range of price depreciation is quite varied but steadily increasing as you get older cars. However the median increased quite steadily every time, which proves my hypothesis. I shall take into consideration all of this data and data from hypothesis 1 when choosing hypothesis three.

Hypothesis 3

For this hypothesis I had to take into consideration everything that I have found out during the experiment so far. I have discovered that all expensive cars have luxury facilities and practical facilities. Whereas cheaper cars only have practical facilities that are a necessities. With this in mind I thought I would look at a luxury facility, as only an expensive car would have a luxury facility and therefore an expensive car new is an expensive car old as proven by our hypothesis 1. so with all this in mind I have decided to look at which cars have air conditioning and which don’t. As not only does this determine whether it’s an expensive car or not, but it also is a commodity that most people would love in their own car and therefore would push the buy every time. What I am going to do is use a cumulative frequency histogram for all the cars with air conditioning and without air conditioning. I will be using a cumulative frequency histogram so that I can determine the upper and lower quartiles and the mean on both.

Conclusion

And to conclude the experiment went very well and all things went according to my hypothesis. And I feel there is much more that could be elaborated upon to push the experiment even further.