Role of Effective Model to Assure Price of Used Cars

Role of Effective Model to Assure Price of Used Cars

* Dr Rajeev Singh,**Dr.Pradeep Kr Singh Bhaduria,***Er.Dileep Verma
* Associate Professor(Business Management),**Assistant Professor(Civil Engg.),***Assistant Professor (C.S.Engg.)

 Faculty of Technology,Etawah C.S. Azad University of Agriculture & Technology, Kanpur, U.P.

Introduction

Predicting the price of used cars is both an important and interesting problem. According to data obtained from the National Transport Authority, the number of cars registered between 2003 and 2013 has witnessed a spectacular increase of 234%. From 68, 524 cars registered in 2003, this number has now reached 160, 701. With difficult economic conditions, it is likely that sales of second-hand imported (reconditioned) cars and used cars will increase. It is reported that the sales of new cars have registered a decrease of 8% in 2013. In many developed countries, it is common to lease a car rather than buying it outright. A lease is a binding contract between a buyer and a seller (or a third party – usually a bank, insurance firm or other financial institutions) in which the buyer must pay fixed installments for a predefined number of months/years to the seller/financier. After the lease period is over, the buyer has the possibility to buy the car at its residual value, i.e. its expected resale value. Thus, it is of commercial interest to 754 Sameerchand Pudaruth sellers/financers to be able to predict the salvage value (residual value) of cars with accuracy. If the residual value is under-estimated by the seller/financer at the beginning, the instalments will be higher for the clients who will certainly then opt for another seller/financer. If the residual value is overestimated, the instalments will be lower for the clients but then the seller/financer may have much difficulty at selling these high-priced used cars at this over-estimated residual value. Thus, we can see that estimating the price of used cars is of very high commercial importance as well. Manufacturers’ from Germany made a loss of 1 billion Euros in their USA market because of mis-calculating the residual value of leased cars . Most individuals in Mauritius who buy new cars are also very apprehensive about the resale value of their cars after a certain number of years when they will possibly sell it in the used cars market. Predicting the resale value of a car is not a simple task. It is trite knowledge that the value of used cars depends on a number of factors. The most important ones are usually the age of the car, its make (and model), the origin of the car (the original country of the manufacturer), its mileage (the number of kilometers it has run) and its horsepower. Due to rising fuel prices, fuel economy is also of prime importance. Unfortunately, in practice, most people do not know exactly how much fuel their car consumes for each km driven. Other factors such as the type of fuel it uses the interior style, the braking system, acceleration, the volume of its cylinders (measured in cc), safety index, its size, number of doors, paint colour, weight of the car, consumer reviews, prestigious awards won by the car manufacturer, its physical state, whether it is a sports car, whether it has cruise control, whether it is automatic or manual transmission, whether it belonged to an individual or a company and other options such as air conditioner, sound system, power steering, cosmic wheels, GPS navigator all may influence the price as well. Some special factors which buyers attach importance to in Mauritius are the location of previous owners, whether the car had been involved in serious accidents and whether it is a lady-driven car. The look and feel of the car certainly contributes a lot to the price. As we can see, the price depends on a large number of factors. Unfortunately, information about all these factors is not always available and the buyer must make the decision to purchase at a certain price based on a few factors only. In this work, we have considered only a small subset of the factors mentioned above. More details are provided in Section III. This paper is organised as follows. In the next section, a review of related work is provided. Section III describes the methodology while in section IV, we describe, evaluate and compare different machine learning techniques to predict the price of used cars. Finally, we end the paper with a conclusion with some pointers towards future work.