Introduction

When it comes to the valuation of cars, many macro and micro, subjective and objective factors are at play.

Decisions are only as good as one’s access to the best available data.

We propose that a user with access to current and historical market data of car sales can achieve a valuation edge when buying a used car. 

Depreciation Curve

The depreciation factors that drive down the valuation of a new car can be plotted on a depreciation curve guided by groupings of used car prices  plotted over time.  

Depreciation at a specific vehicle level is driven by wear & tear and design obsolescence.

Outliers do exist, so users must be mindful of individual vehicle attributes as well as price. 

This melting pot of factors manifests the extent of depreciation experienced by any subject car over time which weighs heavily when conducting valuations. 

Servicing Costs

In addition to capital depreciation, on-going servicing costs associated with vehicle ownership is another important valuation factor to model.

Historical Data

Market bottoms are indicated when a subject car has stopped depreciating in value (or is no longer accelerating along the depreciation curve).

Historical data is relevant for any used car buyer who wishes to minimise their cost of vehicle ownership.

Theoretically, one could have an depreciation cost of nil for car ownership if a data driven approach is applied. 

Vehicle prices fluctuate with shifts in the new and used car markets. And Laws of supply and demand is shaped by the broader factors of the economy.  Access to historical data gives scope for this relationship to be analysed. 

Stay Tuned

Over the coming weeks, we will be releasing a series of market valuation crib sheets for perusal.