How to price your used car with data?
There's a common belief that only professional car sellers are able to properly price a used car. Usually, this is a process conducted by someone who's established a standardized pricing structure based on historical experience. However, on the flip side, the buyers face obstacles when human bias plays an important piece in this equation. How do we price used cars based on car sales experience subjectivity?
We search for similar vehicles, estimate a rough baseline price, and adjust it according to a few variables, such as mileage, model, color, and so forth. We use domain knowledge, which in many cases is little to nonexistent on the buyer's side, and current market state analysis.
In the end, the downsides are:
- Buyers leave money on the table;
- Dealerships have a higher margin for price negotiation;
- Buyers make less informed decisions.
Save time and mental effort by using data science to price your car.
Can we save up to $10k selling a used car?
A couple of years ago, I had no other option rather than literally go to different car dealerships and get an average price for my used Hyundai I wanted to sell. I got different prices, from different dealerships using the same criteria. They had no criteria rather than checking a commonly used index table that shows the average prices of every single car in the market. Essentially, car dealerships do the average of the average. Dangerous.
Not having to negotiate a vehicle's price would make things simpler, especially if you are not a car expert. Regardless, I still shouldn't go to a dealership unprepared. If I didn't get the full value of my vehicle, it could substantially alter the effectiveness of my deal.
I had an initial dealership price of $22k and ended up selling my car for $30k to an independent car seller/buyer. That's $8k I could lose to dealerships due to the lack of information or way to prepare myself for a negotiation.
The market still lacks data-backed tools to price used cars, but...
You can use the existing tools to get an estimate of what your used car is worth.
As I said, you will get a price estimate, compare vehicle to vehicle, and some other additional information, however, the lack of confidence in your car's real value will remain.
What if shoppers had access to vehicle data?
The automotive industry has witnessed a massive transformation over the last several years leading to the disruption of the usual ecosystem of automotive players.
Multiple advancements in the field of data analytics and its connection to the automotive industry have led to smarter, efficient, and more connected vehicles, leading to a radical boost in sales as well as marketing.
At present, automotive companies are capable of collecting and analyzing an enormous amount of raw data. However, what if this enormous amount of data were placed in shoppers' hands to support them to make better decisions?
Human bias is still an important obstacle in this value chain and shoppers can play a more aggressive role in either selling or buying cars.
What if you said your vehicle was worth $40k and dealerships begged to offer you more?
JP Paiva
Definitely Not a Linkedin Top Voice.
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