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Automobile Loss Rates and the Expected Capital Cost of Vehicles: An Empirical Note

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  • DAVID A. HENSHER

Abstract

Knowledge of the market loss rate of vehicles is necessary for the determination of the expected capital cost of vehicles, a major influence on vehicle demand. It is also required in its own right for predicting the availability of specific vehicles of known vintage at future dates. We draw on the existing literature on vehicle scrappage and its links with future vehicle prices to provide a simple framework for determining the loss rates and relevant capital costs of the stock of vehicles available in 1982 in the Sydney metropolitan area. The empirical evidence shows that vehicle prices haw an influence on vehicle life expectancy. and that technical deterioration alone is an inappropriate basis for loss rate determination.

Suggested Citation

  • David A. Hensher, 1987. "Automobile Loss Rates and the Expected Capital Cost of Vehicles: An Empirical Note," The Economic Record, The Economic Society of Australia, vol. 63(3), pages 247-254, September.
    • Handle: RePEc:bla:ecorec:v:63:y:1987:i:3:p:247-254
    DOI: 10.1111/j.1475-4932.1987.tb00655.x
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    1. Mertens, Yves & Ginsburgh, Victor, 1985. "Product Differentiation and Price Discrimination in the European Community: The Case of Automobiles," Journal of Industrial Economics, Wiley Blackwell, vol. 34(2), pages 151-166, December.
    2. Victor Ginsburgh & Yves Mertens, 1985. "Product differentiation and discrimination in the European Community: the case of automobiles," ULB Institutional Repository 2013/1755, ULB -- Universite Libre de Bruxelles.
    3. Charles F. Manski & Ephraim Goldin, 1983. "An Econometric Analysis of Automobile Scrappage," Transportation Science, INFORMS, vol. 17(4), pages 365-375, November.
    4. Parks, Richard W, 1977. "Determinants of Scrapping Rates for Postwar Vintage Automobiles," Econometrica, Econometric Society, vol. 45(5), pages 1099-1115, July.
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