Used Car Market and Fuel Pricing



When I was planning on buying a car. I thought I'll buy a used car. Although I was fully aware of George Akerlof's theory about second hand car market, I decided to take a shot at it.  Because the "reasonable man" , that we so often read about in economics, often has reasons beyond  economics.
Reasons like :
  • Leaving the country; don't know what to do with the car; 
  • Bought a new car there is no place to park my old car; 
  • This car is jinxed!
 So I downloaded data from Cardheko and few other sites and started my cherry hunt. I was convinced that I could use analytics to pick my cherry.

Penny (to the Blogger): "Honey, I know you think you are explaining yourselves but you are not."

Ok, George Akeflof's Nobel winning theory suggest that there will be no good cars in a used car market because they don't fetch a fair price.  And he refers to good cars as a Cherrys and to bad cars as a Lemons and in the context of what I am about to present to you, it suffices to say :I believed I could get a GOOD car in any used car market. and I pulled a lot of data and never used it. 

Penny: Why did you not use it? 
Blogger: Because my wife and I decided to buy a brand new i10"
Penny: whatever happened to the reasonable man
Blogger: Adam Smith was never married, no wonder he talked about reasonable men.

Nonetheless, this data made some interesting revelations. For example from the data, I can tell, regardless of the fuel type, most people sell their vehicle after about 8 years. The resale value is a function of year of make rather than kilometers run. There is no difference between quotations from dealers and certified dealers and so on.

Diesel Car owner's Paradox 
 Diesel is much cheaper than Petrol and it always has been. So you would expect a Diesel car to run more per year. So, do diesel cars run more than petrol cars? To answer the question quickly, yes the difference in kilometers traveled per year between Diesel and Petrol cars is statistically significant. Diesel cars run an average of 13000 Km/ Year where as petrol cars run about 8000 Km/ Year.

 This brings us to another question. Do Diesel car owners drive the extra mile simply because Diesel is cheaper? Or have they bought a Diesel car because they have the need to travel that extra mile? (like a taxi
). This is the paradox I am talking about. In my opinion  a diesel car owner ends up travelling more, Much more than what is required to justify their upfront cost, and therefore spending more, simply because their investment in diesel car is only justified  when they travel that extra mile.

 This is an opinion I chose to frame to overcome the guilt of owning a petrol vehicle. :P

 Nonetheless, to answer the question "Do diesel car owners needlessly travel that extra mile?" , I looked at the year of make and Km run per year. If the disparity in fuel prices cause the Diesel cars to run more then, greater the disparity, greater the difference in Km/year between Petrol and Diesel cars.

Graph of Km/Year plotted against Year of make also show a similar pattern, with time the ridge between Km/year for Diesel and Petrol car has increased. Although this may not be sufficient to translate my opinion in to a fact, I am greatly satisfied that there is some supporting evidence favoring my argument. 



The Graph above is for Chennai. But the Patterns are almost similar across other Indian cities. With time the gap between Diesel and Petrol prices has widened and so has the Kms run per year. Thanks to the the policies of the government in office but not in power. And the fear of inflation. (we'll test that theory another time).

Like all others subjects in the forum, this one is also open for debate. Your comments and opinions are welcome. If you are planing to purchase a car, and you are struck in a limbo  between Petrol and Disel cars, Download my PETROL Vs DIESEL CAR sheet and it may help you decide.

Finally I leave  you with some interesting and interactive graphs you can play around with to make your own conclusions.


You could download the complete data used for this blog from this zip file. And if you wish to download more recent data from any site of your choice, you could save yourselves the trouble of learning Perl LWP scrips and use the half-baked scripts I have written from here. 

I wish to acknowledge the information/services provided by the following sites.
https://www.mediafire.com/
http://www.cardekho.com/
http://www.tableausoftware.com
Location: Bangalore, Karnataka, India

Comments

  1. Anonymous15 September 2012 at 13:20

    Hey, Akshaya gr8 work man...Myself Ashish. i m really thankful fr your work.. it will help me a lot. But i have a query that in your sheet "PETROL Vs DIESEL CAR" when we select a car from the drop-down list the respective mileages of the car come under wrong headings. fr example maruti estilo VXI BS IV W/ABS shows a mileage of 18.2 in city & 14.5 in long run(i guess "long" is used for the run on a highway). it should be the reverse of it. Either the error is in the heading or in the mileage. If mileages have been exchanged then the decision can be different. please clarify my doubt & if there is an error, i request you to rectify it, as i am in an urgent need to come out of the dilemma of petrol vs deisel cars & your sheet will be very helpful. If possible please reply me here itself or at my email ID: ashishv0517@gmail.com

    ReplyDelete
  2. Akshay Kadidal1 October 2012 at 07:54

    Hi Ashish,

    Thanks for your support. I'll send the fixed sheet to you shortly. I have been super busy at work.

    ReplyDelete
  3. Anonymous1 October 2012 at 21:53

    GREAT WORK DONE MAN !!! ITZZ VERY HELPFUL ...THNX A TON

    ReplyDelete
  4. Anonymous26 November 2012 at 01:39

    very helpful info

    ReplyDelete
  5. Anonymous5 June 2013 at 22:21

    Great Man

    ReplyDelete
  6. Akshay Kadidal16 November 2013 at 15:01

    Hi Thanks Vsmart9. I have had to painfully go through second hand car listings to get the data. I am glad if some one finds it useful. it is quite old though

    ReplyDelete
  7. Akshay Kadidal4 January 2014 at 12:34

    this is awesome
    http://aravindavk.in/diesel-vs-petrol-car/

    ReplyDelete

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