Parmar 1

Ayush Parmar

Prof. Dean Leonard

English 1201.511

20 March 2021

Shopping For a Car; No More Buyer’s Remorse

Buying a car is not easy. The car market is quite big with over 160 brands in the world.

In order to pick out a car, buyers must research and understand the different cars out there. Every

buyer has different things they look for. It is not common for one person to look for the same

exact things in their car search as the next, so it makes sense why the car market is so varied.

What do you take into account? Do you factor in prices? Most people do, but a lot of people just

set a budget. This is a good start because it is necessary to know how much money is available to

spend. However, factoring in pricing also means finding great value for a price. Evaluating value

is not easy, but when buying a car, the most important thing is getting the best value for money.

To understand value, buyers must take into account multiple factors like make, model, fuel

efficiency, and safety features.

Cars have been around for a very long time. The first automobile was invented by Carl

Benz in 1886. Throughout the late 1800s, innovators in France and Germany improved on this.

Once 1900 hit, Americans began to dominate the industry. In 1908, Henry Ford developed the

Model T car. Ford used mass production techniques to make this the first affordable car. This

model is what set the stage for today; the majority of Americans use a car to travel (“Automobile

History”). Since that time, cars have changed a lot. Over time, innovations including the internal

combustion engine, transmission, muffler, power steering and many others have greatly

increased the price of cars. Cars also have safety features like airbags and third brake lights that
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were not present in the beginning. Today there are advanced safety features such as forward

collision warning and blind spot warning. At first there were steam cars, next came the early

electric cars, then the gasoline car finally arrived. The industry is even going back to electric cars

(Bellis). Technology is always improving and as this happens, cars will continue improving.

More and more features will become part of the already lengthy list of things that influence car

prices.

When discussing influencing factors on prices of anything, the law of supply and demand

is the first topic. Specifically, the car’s popularity (or demand) is a major factor in its price.

Knowing the law of supply and demand is important while searching for a car. The most popular

brands are not always the most expensive. For example, the two most popular brands in America

are Toyota and Honda; these two are not the most expensive cars (“New Cars, Used Cars”).

However, the popularity of a certain car greatly impacts what it is priced at. The more popular a

car is, the higher the demand gets, which means the price will go up. Earlier in the essay, there

was discussion of how the model of the car affects the price. Well, the model of the car also

impacts the popularity. The Jeep Wrangler is a great example of this. Starting in about Oct. of

2020, the 2020 Wrangler’s prices began to dip. Since this was around the announcement of the

2021 model, the demand for the older model went down. Then in Nov., when the 2021 Wrangler

released, the price of the 2020 model declined even more rapidly. Meanwhile, the 2021 version’s

price stayed constant. Then towards the end of Jan. 2021, the 2021 Jeep Wrangler began to pick

up in popularity. The demand has gotten so high that in the last 90 days, the car’s price has gone

up 6.64% (“Jeep Wrangler”). The 2020 Jeep Wrangler might be a better option since it is now

about $1,000 less than the 2021 model. These numbers essentially mean that if a buyer wants a

specific car with a very high demand, they should accept that they will have to pay more and
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perhaps will not get the best value. When purchasing a car, the popularity of a car needs to be

taken into consideration to determine whether or not it is worth the asking price.

Another factor involved in the value of a car is the supply. The law of supply and demand

says that when the supply is high the price will be lower and when the supply is low the price

will go up. Early on during the COVID-19 pandemic, the car buying market was not favorable.

In March 2020, every major car manufacturer shut down production. This led to a shortage of all

new cars, in particular SUVs and trucks. Used cars also became sparse because less people

traded in, fewer leased cars were returned and most importantly, banks halted the repossession of

cars with bad loans (Muller).

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Fig. 1. This shows the change in used cars supply and demand over the first half of the

2020 year and how it affected the prices. This study was in the U.K., however this was the peak

time of the pandemic so essentially the U.S went through the same (Campbell).

The scarce supply along with the demand increasing caused the price of cars to shoot up.

The average price on a new car from January to August increased by about $400. The price on a

used car shot up $900 (Muller). The pandemic demonstrated how the supply of cars influenced

the prices. A car buyer that purchased during the early stages would have overpaid for their car

since the additional price was not because of any added value to the car, but due to the car

market itself.

Right now, the car market is recovering from 2020. The car demand is still very high, but

the supply is returning to normal since all manufacturers are back in business. The prices in the

car market have begun to lower, but will not drop to normal. The car market’s “normal” will be

redefined. The demand for SUVs and trucks will continue to be high, so in return they will

continue to be expensive. However, the opposite is true for sedans. Sedans were generally

bought by people on a budget. Now most of those people have been pushed out of the market or

to the used car market. This means that now is the perfect time to buy a new sedan. The demand

is very low and the supply is relatively high (LaReau). The price of these sedans are now much

lower and the features and what not will still be the same. This makes the sedan the best value

for money at the moment.

Fuel efficiency is one of the greatest factors in car prices. This is something that car

buyers must consider when determining the value of a car. In Ibadan, Nigeria, there was a study

conducted with the purpose of finding how certain car characteristics affect the prices.

Researchers found that car buyers are willing to pay less for a fuel inefficient car. Fuel efficiency
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is a measure of how far the car can go with one gallon. Less gas usage for a certain distance is

better efficiency. This means buyers do not want to spend more money upfront when they know

they will have to pay additionally extra while buying gas (Arawomo and Augustine 1226). Car

dealers know this so there is always an additional price to the more fuel efficient cars. However,

paying a bit extra for a car may save money down the road. If there are two cars priced in the

same range, the more fuel efficient car is of better value.

A second influencing factor related to fuel is the fuel prices itself. The relationship is not

exactly linear. As gas price increases, more fuel efficient cars will cost more while the less fuel

efficient cars’ prices go down. In September 2005, the average price per gallon rose to over three

dollars for the first time ever. From then to 2008, the Congressional Budget Office analyzed fuel

economy of cars and their sales. They found that the average fuel economy of cars had increased.

Compared to light trucks, the sales of cars also increased. This shows that as the price of gas

went up, relative to larger less efficient cars, the demand for smaller more fuel efficient cars

increased (Austin et al.). This demand caused the prices of cars to go up as well. As gasoline

prices change, the prices for fuel efficient and less efficient cars will always go up and down.

When the price of gas goes down, the demand for more fuel efficient cars will go down. This

means the price of these cars will go down as well (Austin et al.). As talked about before, the

benefit of more fuel efficient cars is that it saves money down the road. This would be especially

true while gas prices are skyrocketing. When gas prices are high, the higher fuel economy cars

are of better value. When gas prices are lower, they won’t drop even more without going up

again. This means the more fuel efficient cars -which will be cheaper than at most times- will

have great value right away and in the future.

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A common misconception among buyers is that the car’s reliability affects the price.

However, this is not true. In a study in 1987, researchers hypothesized that cars with higher

reliability will have a higher retail value. They felt that more reliable models would have lower

maintenance costs which would cause the original selling price to be higher. These researchers

also hypothesized that the wholesale price would be higher if the car’s reliability is high (Ginter

et al. 267). The study found a significant relationship between the two in the retail market of

1978 and 1979. However, the relationships were in different directions. In the wholesale market

there was no relationship between the reliability and the car’s price. The researchers concluded

that neither the retail nor the wholesale price is closely related to the reliability of the car. Neither

market takes into account the reliability ratings (Ginter et al. 268). Car reports on Edmunds hold

this conclusion to still be true. These reports are not written to discuss this specifically and there

is still evidence that no relationship between the car’s reliability and the price is present. Many

car experts base the car’s reliability on the brand’s reputation. Honda models are said to be the

most reliable performance wise, while Chevy’s are not very reliable and require service quite

often. This does not alter the price range of either of these brands’ cars. They are both within the

$25,000 to $30,000 range (“New Cars, Used Cars”). This means when purchasing a car, there is

no reason to buy a car that is known to require service and maintenance often. This will cost an

additional amount of hard-earned money that is not necessary. If a more reliable car is in the

same price range, that car will be of better value.

Instead of worrying about reliability, a car buyer should focus on how the quality of the

car affects the pricing. The quality of a car is based on the interior and exterior of the car. The

exterior of the car includes factors such as condition, brand and especially model. Luxury

features of the interior of the car influence price as well. This includes, but is not limited to
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leather seats, navigation, digital AC, seat heat and alloyed wheel (Gegic et al. 116). Other

features in the interior are safety features. Some of the more common safety systems are airbags,

anti-lock brakes, and traction control (“Guide to Car”). The more advanced safety systems are

what influence the price of the car. These are things such as forward collision warning, automatic

emergency braking, blind spot warning and many others (“New Cars, Used Cars”).

Understanding the exterior and interior of the cars and how they impact the prices will make

finding great value fairly simple.

The exterior of a car has a significant relationship with the price. The aforementioned

study in Nigeria uncovered how the condition of the car positively impacts the price. Some

buyers might look for a brand new car, others might be content with a slightly used car. A new

car will always attract a higher price than any used car (Arawomo and Augustine 1226). In the

used car market, the price is set solely by consumers. Characteristics related to performance like

engine power and mileage influence these prices. If the engine power of the car is still relatively

high, the car will have a higher price than a car with a lower powered engine (Arawamo and

Augustine 1222). The usage of the car is also important to know; the more mileage the car has,

the lower the price goes. For a used car, the price drop for each mile it has been driven is not

constant. After the first 3,000 miles, the car’s value drops between $5,000 and $10,000. After

that, the value drops 25 to 50 cents per mile. Before buying a used car, know the mileage on it

(“New Cars, Used Cars”). Then research the cost of a brand new car and subtract the correct

amount based on the mileage of the used car. This way there is no mistake of overpaying for an

older, used car.

Another exterior feature that is important in the price is the brand. Looking at different

brands of SUVs on Edmunds, it is easy to see which brands generally have higher prices and
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which ones have lower. Honda’s SUVs are between $25,000 and $30,000. Buick, GMC, and

Cadillac all have thier’s priced between $30,000 and $45,000. Then the next tier of SUV brands

includes Acura, Mercedes, and Porshe. These brands’ cars are within the $50,000 to $70,000.

Land Rover, Jaguar, and Infiniti all have their SUVs priced above $70,000 (“New Cars, Used

Cars”). These generalizations are not perfect; however, the order of these brands can be

attributed to sedans and other cars.

Along with the brand goes the model. Every year all car makers come out with new

models of their cars which leads to older models being valued less. The relationship between the

price and model is positive. This means that the newer the model, the higher the price will be. An

older model will not and should not be close in price to the latest model of the same car

(Arawamo and Augustine 1227). This change in price is due to the newer models possibly

having different and most likely more advanced features. When buying a car, it is important to

know about all the recent models. This way the buyer can see which models have the features

they are looking for and which ones do not (“Cars”). There is no need to pay for the latest model

if it does not have new features of interest.

In order to know the true value of a car, a buyer must understand the features that are a

part of the interior of the car. In an article by Enis Gegic, a model for predicting car prices is

being discussed. Gegic’s model had to take into account some luxury features. These were

leather seats, navigation, digital air conditioner, seat heat, and a panorama roof (116). Only in

recent years have these features become standard in cars. Meaning the relationship between these

features and the price is the same as the correlation between car model and price: significantly

positive (“Cars”). The study in Nigeria also agrees. Their results found that features such as air

conditioner and leather seats increased car prices greatly (Arawomo and Augustine 1227). This
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increase in price makes sense because these features are considered newer technology. Cars with

all these features will cost more than one with only a couple. It is important to know how many

and which of these features are in the car in order to find the value.

In recent years, technology has improved tremendously. This has extended to cars as

well. One example of this is automatic transmission. Transmission in a car is how the power is

controlled (Arawomo and Augustine 1224). Manual transmission forces the driver to shift to the

appropriate gear based on the road conditions and topography. With the invention of automatic

transmission, the car changes gears on its own. The study in Nigeria found that transmission

mode of a car had a significant impact on the price. Cars with automatic transmission lured

greater prices. (Arawomo and Augustine 1227). This means that cars with automatic

transmission will have an additional price compared to stick shift. Another feature that attests to

society’s never ending innovation is the car’s safety systems. Advanced safety features like

forward collision warning, automatic emergency braking, and blind spot warning all influence

the price of cars. Forward collision warning alerts the driver when they are approaching another

car too fast. Automatic emergency braking is an extension of collision warning; the car will

sense a potential crash and automatically brake if you do not. Blind spot warning alerts the driver

when a car in another lane is possibly in the car’s blind spot. Obviously, these advanced systems

would cost more (“Guide to Car”). The majority of this technology has become standard in most

models. However, if it is not, a buyer can choose to add any of these features to their car for an

additional price (“Cars”). Car reports say that if these features are only optional, the price range

starts lower, but extends to a higher price than when they are standard in a similar model (“New

Cars, Used Cars”). Buying a car with advanced safety features has some benefits, but it will cost

more. If a buyer finds these features as useful, they should add on the ones of interest. If a buyer
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is not looking for advanced safety features or automatic transmission, they should not pay the

additional prices added to the cars that have these features as standard.

When looking for a perfect car, some people might not consider value at all. For example,

buyers might solely consider how the car looks instead of how that affects the price. Some

buyers want a flashy car with a bright color. Others just want a basic black, white, or gray car. If

a buyer’s most and only important priority is aesthetics or brand, they could wind up overpaying

for a car because of the features that are a part of the interior. These might include advanced

features like blind spot warning or forward collision warning that increase the price significantly

when that is not something the buyer was looking for (“Guide to Car”). This buyer would end up

not getting the best value for the amount they spent.

The opposite of this would be another buyer specifically researching the interior of cars

to find their perfect fit. Doing this would not be terrible, but it could still lead to spending money

on unnecessary things. When a buyer only looks at the interior features, they fail to think about

the exterior of the car. The buyer might have found a car that has all the features they want on

the inside, but a different brand might have those same features for a better price (“New Cars,

Used Cars”). An older model could also have those features and the cost would also be lower

(Arawamo and Augustine 1227).

Looking at only one specific part of the car when shopping will lead to paying additional

costs when there was most likely a better option out there. If a car buyer does not take into

consideration the entire value of the car, they will most definitely end up over spending (“Cars”).

Overpaying is not something that should be taken lightly. Cars are a huge investment and for

some is their first big purchase. Many people save up for years and years in order to buy a car.

This will be something that once bought, there is no returns, at least not for the same price. This
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is why understanding how different areas and features impact a car’s price is so important: to get

the best value for money when shopping for a car.

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