## Monday, December 23, 2013

### Used car mileage and pricing. What is so magic about the 10,000 mile mark when it comes to the value of a used car? I need help on this one...

We behave in strange ways as consumers when it comes to numbers.  The graph below is from a study on the sale of used cars (HT: Priceonomics).  On the vertical axis is the average sales price of a used car at auction.  On the horizontal axis is the mileage of the cars sold.

As expected, there is an inverse relationship between the price of the car and the mileage:  The higher the mileage the lower the price.

However, the study noted an interesting trend. Look at the vertical bars along the horizontal axis representing the mileage at 10,000 mile increments.  Notice the drop off in the price of the car RIGHT AT the 10,000 mile increment (arrows pointing).

If the mileage is just short of the 10,000 mile mark the vehicle gets a significantly higher price than if it has 100 or so additional miles OVER the 10,000.  Otherwise the relationship is pretty smooth BETWEEN the 10,000 mile increments.

If you want to get the highest possible price for your car, given its mileage, the best time is to sell it BEFORE it rolls over the the next 10,000 mile mark.  Otherwise you will be out some money!  If you are a buyer then look at cars that just cross the threshold.

There is one interesting point on the graph. Look at the RED arrow.  At the 30,000 mile mark the pattern is noticeably interrupted.  There appears to be no price "cliff" at that threshold.

Any guesses as to why (1) the noticeable drop off in prices at all  but one (really more at the very high mileage level) of the 10,000 mile increments, and (2) why the absence of one at 30,000 miles?
 Source HERE (I modified the original by inserting the arrows)

#### 4 comments:

1. I agree with the seal: very interesting!

Do I see a drop-off at 25000 miles? Perhaps that one is the reason there's no drop-off at 30K. Everyone with a 30K concern expressed it at 25K.

People think in terms of round numbers. A hundred of this, a thousand of that, a quarter of something. Grasp-able numbers.

1. Upon second glance, there is considerable noise between 20,000 and 45,000 miles. The grouping between 35,000 and 40,000 is relatively flat and stable even more so than at the bottom end of the market. I suppose that level of mileage and age of car (about 2-3 years) are in their "sweet spot" for the market at large.

The seal (or walrus??, I honestly dont know!!) will make be a more common occurrence from now on. I need his positive feedback to keep me going. :)

2. Still, there is a preponderance of price breaks at those round-number points. It's really quite remarkable.

Merry Christmas!

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