You can define value in many different ways, but what does true worth look like to you? In light of the complex economic times we’re living in, many consumers are turning to quality used vehicles as a cost-effective alternative to buying new. However, figuring out a fair, market-related price is a complicated task for both buyers and sellers. The risk for dealers is greater still in that, unlike new cars, most used vehicles depreciate, with their value falling every day they sit on the showroom floor.
Colin Morgan, CFO at the quality car pricing experts, getWorth, says you cannot think of the used-car market as a fully rational place. “It’s an irrational environment. The truth is there is no exact right price, there is merely a range of prices, a position in the market. Some sellers are under- or overselling on purpose, some dealers have had the car in play for a long time and it’s just not moving so they are discounting it heavily. To cut through all this, getWorth’s AI-pricing model is a way of finding order and sense in a hugely diverse market,” says Morgan.
What is AI pricing?
Artificial Intelligence is widely deployed in other spheres of the car industry, from design and manufacturing, to production and automation, as well as tech features such as autonomous driving. AI pricing makes used-car pricing more accurate and transparent for buyers and sellers, adding worth all the way down the value chain.
No two used cars are same. Sometimes there’s only a small difference in mileage between two cars, other times the year, colour, variant, drivetrain and options may vary. Every year tens of thousands of unique cars enter the market, and once they become used cars you can start differentiating them further still by service history and condition. “All these factors create a huge diversity in a market which needs to be assessed objectively and not subjectively like in the days of book values,” explains Morgan.
How does AI work?
The Toyota Fortuner 2.4GD-6 can be regarded as one of the gold standards of pre-loved cars because of its quality, reliability and relative absence of costly options. At any one time on SA’s online selling platforms there can be upwards of 365 Fortuners for sale. If we look at 2019 4×2 Automatic models specifically, all things being equal, lower mileage should hold sway. They have the same warranty to run but there’s less mechanical wear which means less risk, which should provide better value, correct? But that’s not reflective of the actual prices in the market. The most expensive (at the time of writing) might sit at R539 950 with 61 000 km, the most affordable at R415 000 with 71 000 km on the clock. These are the outliers, but the core of the market retails around the R500 000 mark. “The getWorth AI model predicts a rational price that is never a straight line but rather a curve. When we take a look at a vehicle’s mileage versus age, mileage is one of the most important factors. In our view higher mileage plays a bigger role in mechanical risk and wear on the car versus age,” explains Morgan.
“Pushing all the market data through our neural network model comes out with a result. The algorithm then analyses this and subtly adjusts its weightings. We’re talking everything from brand, vehicle age, mileage, drivetrain, fuel economy, power, weight, components – too many factors to list in fact – and it does this between different cars in the market, too, like BMW 3 Series vs. Fortuner,” says Morgan.
It processes all the data through the algorithm millions of times over, until it discovers an optimum balance of factors across the whole market. By its very nature, the machine is learning all the time and the results being refined. “It is very complex, and its genius is in working out subtle relationships between data over time to uphold what is relevant to give an accurate price. It’s so powerful, I could input a car/derivate which never sold in South Africa and it would be able to predict a price for me … for a car that doesn’t even exist,” explains Morgan.
What is the benefit for consumers?
Knowledge is power, and from a consumer perspective the getWorth AI model gives the most accurate insight into the market as a whole, taking every imaginable factor into account. “The real upside for consumers is how we use these price curves to arrive at the most transparent, fair and rational valuation of a car in the market. This is not to say we will be the highest offer, but ours are generally – especially for low-mileage, high-quality cars – the most accurate and fairly priced, but also sometimes higher because we take a different, objective view,” concludes Morgan.
Take the first step towards selling your car at its true value. Get a quote from getWorth today and experience the future of car pricing.
