Accounting Report Essay on Used Cars

Used Cars


            Buying a car can be a devastating occurrence with many factors to consider before settling for a certain car model. There are many features that need to be considered when one is buying a car. These factors include the model of the car, the price, the environment which the car will be used and the odometer reading if it is a second hand car. Cars can be differentiated by observing the characteristics that include the model, model year, cylinders, displacement and transmission. We are able to identify these measured due to the use of individual prices and variation in energy expenses per model of the car and odometer reading at the time of purchase. These factors are: – price, fuel consumption, odometer reading, safety, durability, performance and the operating costs. In our study, we will focus mainly on the reading of odometer and the cost. We will establish an association between these two factors.

Used-car market has changed drastically in the past few years. Today’s new used cars are better in quality, stability and strength which are challenging the local manufacturers and hard-pressed to create cars which are cost effective and high performances to compete with second hand imports. Used cars are very popular in our society today, this because one can save up to thirty to forty percent over buying a new car.  This study investigates whether the used car buyers are having an effective prices compared to the odometer reading. With different assumptions about mileage, endurance and demand elasticity, calculate the relationship between the odometer reading and the quoted price for these cars. Also consider the vintages, and fuel usage in relation to the odometer reading at the time of buying. The car’s engine is measured using cc (cc in engines stands for cubic centimeter).

To purchase a used car one can visit numerous websites, newspapers, journals and marketing flyers where he can choose a manufacturer, year of manufacture and get an interim odometer reading and the price range. In websites one can compare prices of different cars, models, engine capacity in cc and get facts about the fuel usage. It is essential to take a test drive so that one can have confidence that the odometer is not tampered with. To be on a safer side one can buy certified used vehicle, although it will cost a little more but the quality is assured. In our sample we held up the computation of average prices within collected data which is based on manufacturer, model, cc rating ranges, and age of car. To ensure usefulness of these averages cars with tampered odometer were disqualified from the study which resulted in use of only around 75 percent of the data collected. In this study we will analyze if there is any relation between the odometer analysis and the price of a used car.

Literature Review

The literature related to this study was reviewed from online journals, research reports and raw collection of data from people who are interested in buying or selling second hand cars. Understanding the today’s needs and functions of a used car are fundamental aspect of responding to increasingly demand. Several of the topics discussed are:

  • Identifying the customer’s needs
  • Analyze and adjust the prices to suite the targeted customers
  • Analyze the regulations to import used cars
  • The traders credibility

An individual to make selling decision of their car, they identify private information from dealers or traders who purchase and sell cars. They may also trade in the car they are using for a better model or improved efficient car. The responsibility of maintenance of these cars is passed to the customer and mostly they are not given a warrant to assure them quality and durability. Due to this vice, most buyers prefer to rent or lease the car for sometime before buying (Caserini, Pastorello, Gaifami & Ntziachristos 2013).

The literature review establishes there are advantages gained by individuals who purchase used car. In terms of acquiring the cars, it offers a cheaper price which is economical and socially acceptable. Most people prefer to buy these cars because of their socio-psychological benefits for those who are conscious about their status, self-esteem, socialization and expansive aspiration and cognitive horizons (Krsinich, 2011). Used car traders are accountable to the public to offer motor vehicles that are secure, in good condition, environmental safe and suitable to use. They are also required by the law to guarantee the public on their vehicle’s safety and roadworthiness. Conformity with these laws will protect the buyers from being subjugated or acquiring cars with tampered odometers. Traders and buyers are also conscious on the year of manufacture so as not to get an old vehicle. Cars are different and of various kinds and models will give different performance.

Buying and selling of long-lasting goods can be classified into classes based on assumption made about the data collected and circulated in the market. The literature assumes that complete and reliable information is available to buyers and sellers (Krsinich, 2011). It also assumes that everyone purchasing these cars knows the rules and regulations governing these transactions. As a customer, one is supposed to have a trusted mechanic who will inspect the car thoroughly and give an unbiased opinion of the car. The difference in information between owners and potential buyers creates misunderstanding which forces the buyers to prefer to deal with traders or sellers (Engers, 2012). Used car durability is mostly determined by the first hand user car use and the care used to handle it. In the recent state of affairs, used cars are imported from Japan and Singapore which are cheaper than the locally manufactured cars. The manufactures are getting competition from second hand vehicle which are cost effective to the final users. Traders should have competent mechanics to service and analyze the road worthiness and the safety. An absolute guarantee of sustainability at a low price, quality and durability should be given to the buyer (Engers, Hartmann & Stern 2012).

Endurance capabilities of used cars are determined by the age, model year, class, and manufacturer’s specifications. The manufacturers make cars with modifications between the model years. These models tend to rectify or improve performance of the previous model. The secondary car market is dominated by the odometer reading. The buyer is concerned to know how many miles the car has covered before purchasing. The new car market is expensive for many to afford and to breach the gap; people have decided to buy used cars to meet their daily transportation needs. In relation to the previous literature, the traders tend to estimate the prices using odometer. These estimates are assumed to be efficient and reliable to determine the price (Caserini,, 2013: Engers, 2012).


The method used in this study is collection of information through different sources that is population sample, data collection and data examination. The respondents were car traders, private sellers and customers who are considering purchasing a used car. There were variable studies in the reading of odometer and the value of the car. The primary data source was through interview aided by online information about the related literature.

Cars used in this study are automatic transmission and four cylinders. The models of these cars are Hyundai, Toyota, Mazda, BMW, Mercury, Mitsubishi, Nissan, ford, Volkswagen and Subaru. The size of engine is rated by cc. the sampled data was collected from cars with engine size between 2300cc to 3000cc.

To teach in to an estimation equation, we start with a simple model of the price of used cars which we assume that the used cars are competitive in the market and the supply is inelastic. The data is collected from online traders for both imports and local manufacturers, individuals selling their cars and auction prices. Collected samples were of second hand cars which are on sale. On our study we focused on the relationship between the odometer mileage reading and the price offer. In order to establish this relationship, we used a simple linear regression equation to predict future values. In the simple linear regression, there is only one independent variable which in our case is (y) and one dependent variable (x). Y is the asking cost and x is the meter reading.

Our research strategy is based on exploiting difference in the anticipated future price of the car resulting from differences in the odometer reading and the price at the time a car is sold. For example, two cars in the model of 2011 Toyota Camrys are sold in 2014, one with 50,000 miles on the odometer and the other with 70,000 miles. The price difference between these two cars should replicate the difference in value of having a lower mileage vehicle. This calls for construction of a board classification strategy that requires noticeable car attributes to be common across model years. These classifications included the following characteristics in the model for each second hand car

  • Place of purchase
  • Make and model of the car
  • The vintage in years
  • Size of engine in cc rating, e.g. 2300 cc
  • Odometer reading in miles

With these guidelines one is able to input data on a table useful for analyzing the relation between the two variables.

The lower mileage translates to better condition of the car and a longer expected remaining life. To come up with a linear regression equation, add the odometer readings (x), and the prices to analyze the relation between them. In the following table, xy is a multiplication of the odometer and the price. X2 is the square of X and y2 is square of y. using this information, construct and analyze data using simple model of regression, to develop perception about the relation between odometer and price.

Y= e+fx


Y is representing the equation

 y= dependent variables values (asking price)

x = independent variables values (odometer mileage)

f= the slope of regression line

∑ is the summation sign

   odometer in mile(x)   Price in $ Y  X2  Y2  XY
1            49,515        15,000.00       2,451,735,225.00       225,000,000.00           742,725,000.00
2            50,200        14,900.00       2,520,040,000.00       222,010,000.00           747,980,000.00
3            50,180        14,810.00       2,518,032,400.00       219,336,100.00           743,165,800.00
4            48,850        15,500.00       2,386,322,500.00       240,250,000.00           757,175,000.00
5            35,000        17,795.00       1,225,000,000.00       316,662,025.00           622,825,000.00
6            56,850        13,600.00       3,231,922,500.00       184,960,000.00           773,160,000.00
7            63,235        12,465.00       3,998,665,225.00       155,376,225.00           788,224,275.00
8            70,215        11,250.00       4,930,146,225.00       126,562,500.00           789,918,750.00
9            81,512          9,875.00       6,644,206,144.00          97,515,625.00           804,931,000.00
10            56,124        14,860.00       3,149,903,376.00       220,819,600.00           834,002,640.00
11            57,122        13,050.00       3,262,922,884.00       170,302,500.00           745,442,100.00
12            54,000        13,000.00       2,916,000,000.00       169,000,000.00           702,000,000.00
13            32,597        17,000.00       1,062,564,409.00       289,000,000.00           554,149,000.00
14            31,125        18,000.00           968,765,625.00       324,000,000.00           560,250,000.00
15            51,200        15,000.00       2,621,440,000.00       225,000,000.00           768,000,000.00
16            58,200        14,250.00       3,387,240,000.00       203,062,500.00           829,350,000.00
17            57,618        13,590.00       3,319,833,924.00       184,688,100.00           783,028,620.00
18            71,479        12,500.00       5,109,247,441.00       156,250,000.00           893,487,500.00
19            47,800        19,000.00       2,284,840,000.00       361,000,000.00           908,200,000.00
20            38,468        17,500.00       1,479,787,024.00       306,250,000.00           673,190,000.00
21            59,871        13,850.00       3,584,536,641.00       191,822,500.00           829,213,350.00
22            72,158        10,900.00       5,206,776,964.00       118,810,000.00           786,522,200.00
23            25,987        19,000.00           675,324,169.00       361,000,000.00           493,753,000.00
24            68,713        11,960.00       4,721,476,369.00       143,041,600.00           821,807,480.00
25            50,500        14,500.00       2,550,250,000.00       210,250,000.00           732,250,000.00
26            60,478        13,590.00       3,657,588,484.00       184,688,100.00           821,896,020.00
27            58,970        14,870.00       3,477,460,900.00       221,116,900.00           876,883,900.00
28            64,587        13,200.00       4,171,480,569.00       174,240,000.00           852,548,400.00
29            71,245        12,870.00       5,075,850,025.00       165,636,900.00           916,923,150.00
30            45,860      14,799.00       2,103,139,600.00       219,010,401.00           678,682,140.00
TOTALS      1,639,659      432,484.00     94,692,498,623.00    6,386,661,576.00     22,831,684,325.00

e=    ∑x^2- ∑x∑xy

  n∑x^2 – (∑X) ^2

= 94,692,498,623(432,484) – 1,639,659(22,831,684,325)

  30(432,484) – (1,639,659)^2

  e= -1308.11043

f= n∑xy-∑x∑y

      n∑x2-(∑x) ^2

= 30(22,831,684,325)  – 1,639,659(432,484)

30(432,484) – (1,639,659) ^2

f= 0.008992

Y= e+fx

Y= -1308.11043 + 0.008992x

Findings/ Recommendations

            The findings show that the relationship between the odometer reading and the price is positive. This means that one can use the odometer analysis to forecast the value of the car. In this study it was also discovered that the reading of the meter determines the price of the car no matter the vintage. In addition, odometer reading is as well used to predict the durability and the road worthiness. It was also discovered that some odometer readings were tampered with. For instance, a car that was bought when its odometer reading was 50,000 miles but after the owner used it for two year the reading has dropped to 30,000 miles. This finding implies that car buyers pay more attention to the first two digits on the car’s‘ odometers and ignoring the rest of the digits. This is a dangerous trend because every digit in the meter reading is important and it can increase the buyer’s bargaining power. The decision to purchase used car is totally depended on the meter, and the correct miles coverage for the right price. I am for the opinion that one should value used car capability to meet his daily transportation.

It was established that the used cars are at times not operational to meet the consumer’s needs. It is believed that the relevant legislation is satisfactory but more requires to be done to ensure that dealers are aware of the law, customers are aware of their constitutional rights, and dealers who fail to comply face a real threat of effective enforcement action. It was possible to establish the connection amidst the meter reading and cost for these cars. As a result, there is a significant selection bias problem associated with excluding some cars because the odometer reading was not reliable. Whether the car is being sold with a warranty to convince the customer about the performance, the customer should be cautious of the durability.  The buyer should also take note on the repair percentage for certain duration. The seller should keep the customer in check so that he can provide an after the sale services. The after sale service should be in hard copy so that it can direct the buyer and seller on terms and conditions.


Used cars possession has rapidly increased over the last few years as the living standard has risen. Due to this, people are looking to meet their commuting needs in an economic way by purchasing used cars. When buying these cars, one should make sure that it is not a way of waste disposal from the exporting country. The importing country should acknowledgment this by creating laws on environmental protection and pollution control should be passed to deal with the unceasing threat which posed danger to the vehicle user as well as the citizen.

The statistics used on second hand cars is to estimate the cost of a car by using the odometer reading. Economic challenges that are encountered by use of these cars were identified. By considering the odometer, one can predict the performance, durability and the working cost as well as the price of the car. There was also comparison of the cost of a car with more miles, outstanding to the price of an identical vehicle with few miles remaining.

The outcome of this experiment is understood as an examination of whether or not consumers fully aware of the price of used cars. With the present condition, one can only jointly check assumptions about the discount rate, gas price usage, and rationality. The customers are willing to economize on fuel expenditure by purchasing an economy vehicle. This marketplace study has given an understandable image of the reasons why a client experiences problems when buying second-hand cars. It is believed that existing consumer protection law is fit for the principle and has the prospects to tackle many of the unwarranted trading practices that have been identified in the market. There is confidence in the use of the already made by law provisions in handling a number of these serious and destructive practices in the second-hand car market.  The second-hand cars need to introduce and enforce laws to prohibit mileage modification or alteration and their publicity.

Emanating from the findings and consequent conclusion, the following points should be considered.

  • The model of a car and its genuine odometer reading
  • The year of manufacture
  • The dealer is confident about the car and he can offer warranties

There is always a concern that buying a used car will signify one is buying someone else’s nuisance. An important step in buying a used car therefore is to have an excellent mechanic verify the car capabilities and performance. A good mechanic should be able to tell whether the used car one is taking into consideration is in good shape. If there are some foreseeable troubles he should advice accordingly. The mechanic should also determine whether or not it has been involved in car accident.  He should also check the trustworthiness rating for the car one is looking at in a dealer’s shop.


Caserini, S., Pastorello, C., Gaifami, P., & Ntziachristos, L. (2013). Impact of the dropping activity with vehicle age on air pollutant emissions. Atmospheric Pollution Research4(3)

Engers, M., Hartmann, M., & Stern, S. (2012). Automobile Maintenance Costs, Used Cars, and Private Information.

Krsinich, F. (2011). Measuring the Price Movements of Used Cars and Residential Rents in the New Zealand Consumers Price Index.