When I buy a car, I analyze what car I would like to buy. I look at reliability, repair costs, overall costs, and style. I use Consumer Reports to help me analyze this. Then I go to the website(s) of the manufacturer in question, and copy the data on all of the used models on offer at the dealerships within 30 miles of me. With price as the dependent variable, I then run a regression with model year as dummy independent variables, and total miles as an independent variable. After I run my regression, I look at the cars with the biggest price deviations, the predicted price is a lot higher than actual. I then look at the features of the underpriced cars, and choose one where there are good features with a discounted price.
I go to that dealer, review the car, test drive it, and if it passes my tests, I haggle over the price, and buy it. In my experience, this cuts thousands off the price of the car. What a great reason to have studied econometrics.
David,
Greatly enjoy reading your blog, as I have enjoyed and benefited by your RealMoney articles over the years. Yours is a voice of reason and calm, and very welcome in these “shrill” days.
A quick comment about price discovery for car buying: Ebay is simply amazing in that respect.
Best wishes!