Investigating Which Factors Affect the Price of a Used Car

Investigating Which Factors Affect the Price of a Used Car

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Investigating Which Factors Affect the Price of a Used Car

Introduction:

I have been given a database which contains information about one
hundred different used cars. We are investigating what is the most
influential factor when buying a second hand car. The factors which I
will be using are the age and mileage of the cars to see how they
affect the price.

Hypothesis:

Cars which are older and have got more mileage are generally cheaper,
but if I have a vintage (antique) car it will change my graph so it
would skew my data as an outlier. Also some cars will depreciate
quicker than others in their first year.

Plan:

Using the data which has been given to me I will compare age to
mileage on a scatter graph with price. If I did the investigation by
hand I would have chosen a sample of 100 cars of about 20 being picked
at random using every 5th car as a sample and picking where to start
counting at random by putting the numbers lets say the numbers 1-5 in
a hat and pulling one out at random, But however I have been given the
data on excel. By doing the charts on excel I will be able to plot all
the data on the scatter graph and then draw a line of best fit
(trendline) more easily and then compare between age and mileage
because the computer can generate a graph much quicker than if done by
hand. This will show me what sort of correlation the graph has,
whether positive or negative and how strong it is and also become
apparent with the line of best fit. If my investigation goes well, my
hypothesis should be correct and should expect some outliers. On excel
I would eliminate the outlier if I need to get a better line of best
fit. Also I can use specific makes of cars to compare how quickly the
car price decreases. When I have completed the graph containing all
the cars I will draw graphs containing specified data specific to

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different makes of cars such as Fiat and Vauxhall, I have chosen these
because they are the most numerous and will give me the most concise
data out of all the types of cars. I will then compare my findings and
see if there is any similarity between them such as the older the car
the cheaper it will be and the more mileage it has done the cheaper it
will be or as I have mentioned before I will get some vintage cars and
skew my data. I will also be looking at price depreciation because I
now that a new car looses its price in the first year that it has been
made and this will show how much money the car has lost in over a
period of time.

[IMAGE]

This graph shows that I have compared price to age. I am not too happy
with this graph due to the trendline appears to have been drawn wrong
by the outliers. I will now remove the outliers so that I can get a
more accurate trendline on excel.

[IMAGE]


Now that I have removed the outliers from the original graph and I
have also added the equation for the graph which shows me that for the
cars that I have they will lose £854.76 every year on average.

[IMAGE]


This graph shows that I have compared comparing price and mileage. I
am not too happy with this graph due to the trendline appears to have
been drawn wrong by the outliers Bentley Rolls Royce. I will now
remove the outliers because they are skewing my data to make the
trendline inaccurate, I will also add the formula of the graph on to
the trendline.

[IMAGE]


I have now changed my graph by removing the 5 outliers that were
skewing my data, Now that I have removed the outliers from the
original graph and I have also added the equation, which shows me that
for every mile a car has done it has lost almost 5.01pence. This is
the percentage of depreciation of the cars.

Now that I have done the price against age and mileage for all the
cars, I will now compare those using specific makes of cars such as
Ford and Vauxhall. Firstly I will do Fords, as they are the most
numerous of all the cars in the table. Then I will compare my results.

[IMAGE]

I have now made a Ford graph for price against mileage, and the
equation on the trendline shows me that for every mile a Ford car has
done it will lose on average more or less 9 pence which I have
rounded. I will now use the Ford data to compare price to age.

[IMAGE]

This is the graph that made with the data given to me when I compared
price to age on Ford cars. The equation which I have put on the
trendline tells me that every year on average the price will reduce by
£808.77.I find the graph not acceptable because the cars will loss
the largest percentage of their value in the first year on the road
and the amount of depreciation will reduce every year at a steady
rate.

These two graphs which I have done on Ford shows me, that for every
one unit of measurement of the cars age the more influential to the
price of the car. However the car might do far more miles than it will
age for example a Ford car may do 10,000 miles in one year so it will
loss on average £89.9.

The age of the car is still more influential but on the first year it
will use most of its value in the first year and the depreciation will
decrease every year at a steady rate.

I will now compare Vauxhall to Fords but first I have to do the price
for Vauxhalls.

[IMAGE]

I have now done the graph and the price depreciation is exactly
£772.96 compared to the Ford car depreciation it is £808.77 which
shows that the Vauxhalls loss less money every year.

[IMAGE]

This is the Vauxhalls price/mileage and for every mile a car does it
will loses 0.082 pence compared to the Fords 0.089 pence which shows
that there is a minute difference between the two different car makes
but not enough to be influenced.

When I compared the Vauxhalls to the Fords I found that the Vauxhalls
depreciate less than the Fords over the years.

I will now make some graphs for the price depreciation against the age
and also against the mileage for all the vehicles and then for the
Fords and Vauxhalls.

[IMAGE]

The trendline which I have made by excel shows that this is a very
strong positive

[IMAGE]correlation and also the equation shows me that in the first
year of the car will depreciate about 50% on average and in the second
year it will depreciate by 60% and in the third year a car will
depreciate by a little over 60%. I have found out this information by
reading of my graph, so the car will loose most of its value in the
first year and then it will depreciate on a steady rate.

This graph which I have made shows me that there is again a very
strong positive correlation as the points are very close together,
also the cars will depreciate 0.0006% on average for every mile it has
done. I have found this out by looking at my graph that I have made.

Conclusion

From all the information that I have made from my coursework I have
come to the conclusion that there are many things that affect the
price of a second hand car these include:

* Style

* Central locking

* Seats

* Gearbox

* Air conditioning

* Airbags

* MPG

* Mileage

* Service

· Owners

* Length of MOT

* Tax

* Insurance group

* Doors

* Age

* Colour

* Engine

* Fuel

And many more. I have got all these suggestions from my excel table
which my coursework has been based upon. There are also some
exceptions which influences the price of the car; the cars that are
the exception (outliers) gains money due to that these are vintage
cars e.g. Bentley, Mercedes and many others. This will nearly always
be the case because there will always be cars that gain with mileage
and those that will lose money with mileage. The data which I have
collected has proven quite true in my hypothesis and my plan.
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