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This article is a follow up on the previous post on Car Mileage.

A common belief amongst people is that the value of a car declines more rapidly the newer it is. Some say your car loses 25% of its’ value when you drive it off the lot. I am about to put my Craigslist data to the test to help prove whether or not this theory actually works.

In my first example I used 2001 Jettas found on Craigslist. Based on those Jettas that came up in my search, only 26 of them were qualified to be entered into the data. I did not accept any VR6, TDI or wagon Jettas. I did this in order to keep the data the most consistent. The average 2001 Jetta had 82,312 miles and was selling for a price of $8,106. I found that for 2001 Jettas, they lost on average $.0342/mile driven. If this theory is to hold true, the 2003 Jettas should decline in value more per mile than the 2001 Jetta.

Let’s take a look at the data:

Listings with a negative difference are underpriced based on the data. Listings with a positive difference are overpriced based on the data.

I took the exact same approach as I did with the first test, except this time through I searched for “2003 Jetta” on the Craigslist site for Seattle. It returned 40 matches, and of those only 21 were qualified to put into the data. For the 2003 model, the average Jetta had 64,488 miles and was selling for $10,869.

After processing the data, I find that the regression of the data points has a coefficient of -.0328, meaning that for every mile that the car is driven, it loses 3.28 cents. It turns out that this is actually less than the 3.42 cent per mile loss for the 2001. The Y-intercept for the 2003 is $12,981.62 as opposed to $10,927.01 for the 2003.

You may recall that I calculated the value of a 2001 Jetta with 80,000 miles to be worth $8191.01 from the 2001 Jetta equation. Taking the 2003 Jetta equation, we shall find out what the value of an ‘03 Jetta with equal mileage should be. We can find this by subtracting from the intercept. So: $12,981.62 - (-.0328 x 80,000) = $10,357.62. This shows us that a buyer would pay $2166.61 for a model that is two years newer, even though it has identical mileage. In order for the consumer to pay the same amount for the 2003 as they would for the 2001 with 80,000 miles on it, the 2003 would have to be at 146,055 miles.

This data seems to find that the value of a car doesn’t seem to decline quicker the newer it is. Given the somewhat small sample sizes, it is possible that the data could be a bit skewed. It would also be interesting to see what the actual sales price of these cars are, because most won’t be sold for their asking price.

For those who must have the latest and greatest though, check out the 2008 Jetta.

This image comes from Autoblog.com

The new Jetta starts at $16,990 + taxes, licensing and all that other fun stuff.

Do the number of miles on your car’s odometer have that much of an effect on its resale value? In this experiment I find the answer to this pressing question.

This stock photo was obtained from automotive.com

In order to find the answer to this common question, I went to Craigslist.com. There I did a search for a fairly common car, the 2001 Volkswagen Jetta. I chose this car because VWs tend to hold their value fairly well, and Jettas are a very popular model. I conducted this search under the Seattle-Tacoma Craigslist section. The search term that I used was “2001 Jetta.” This search returned 54 results for ads that were posted from 4/1/08 - 4/8/08. Of these 54 results only 26 qualified for my statistics.

There were a few major reasons that certain ads did not qualify:

• No mileage was given
• The car listed was not a Jetta or was not a 2001 model
• The Jetta was a TDI (Turbo Diesel) model. These typically have higher resale value.
• The Jetta was a VR6 model. These typically have higher resale value.

All other models including the Wolfsburg were included.

My research found some fairly predictable data. The Y-intercept was $10,927.01. This means that a 2001 Jetta with zero miles on it should have a value of $10,927.01 based on the data. The X-variable coefficient was -$.0342. This translates into a loss in value of 3.42 cents per mile driven from the initial $10,927.01.

Based on the above data, let us calculate how much a 2001 Jetta with 80,000 miles should be worth. We can find this from the following equation. $10,927.01 + (-$.0342 x 80,000). This Jetta should be worth roughly $8191.01 according to the equation that was derived from the data.

In the study, the average 2001 VW Jetta had 82,312 miles and was selling for a price of $8,106.

The following table shows the data that I collected. The miles and price were actual data from the Craigslist listings. The projected column shows what the equation projects that the price should be based on the data. The difference column shows the difference between the projected value and the asking price. Listings that have a negative number are priced under the market value for their mileage. Listing with a positive number could be said to be overpriced in comparison to the other cars in the market.

For a scatter plot of the data, click here.

As you can see from this study, you can find good deals on cars if you compare them across a broad range of listings. In a month I may redo this study on a new batch of 2001 Jettas on Craigslist to see if the data holds up or if it has drastically changed. In most cases the graph should have a negatively sloping trendline meaning that the vehicles are worth less as the accumulate more miles.