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The European used-car market at a glance: Hedonic resale price valuation in automotive leasing industry

Author

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  • Sylvain M. Prado

    (EconomiX-CNRS, University of Paris Ouest, France and GE Capital Solutions Europe in London, UK)

Abstract

In the leasing industry, the risk of loss on sales at the end of the contract term, as well as pricing are critically impacted by the forecasted resale price of the asset (residual value). We apply the Hedonic methodology to European auto lease portfolios, in order to estimate the resale price distribution. The Hedonic approach estimates the price of a good through the valuation of its attributes. Following a discussion on Hedonic prices, we propose an operational model for the automobile resale market. The model is applied to four European countries (France, Germany, Spain and Great Britain), and distributions are calculated on two vehicle versions (Audi A4 & Ford Focus) allowing a comparison of market depreciation patterns and residual value risks.

Suggested Citation

  • Sylvain M. Prado, 2009. "The European used-car market at a glance: Hedonic resale price valuation in automotive leasing industry," Economics Bulletin, AccessEcon, vol. 29(3), pages 2086-2099.
    • Handle: RePEc:ebl:ecbull:eb-09-00355
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    References listed on IDEAS

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    Cited by:

    1. Christoph Gleue & Dennis Eilers & Hans-Jörg Mettenheim & Michael H. Breitner, 2019. "Decision Support for the Automotive Industry," Business & Information Systems Engineering: The International Journal of WIRTSCHAFTSINFORMATIK, Springer;Gesellschaft für Informatik e.V. (GI), vol. 61(4), pages 385-397, August.
    2. Sylvain Prado, 2010. "A Family Hitch: Econometrics of the New and the Used Car Markets," Working Papers hal-04140927, HAL.
    3. Korbinian Dress & Stefan Lessmann & Hans-Jorg von Mettenheim, 2017. "Residual Value Forecasting Using Asymmetric Cost Functions," Papers 1707.02736, arXiv.org.
    4. Dress, Korbinian & Lessmann, Stefan & von Mettenheim, Hans-Jörg, 2018. "Residual value forecasting using asymmetric cost functions," International Journal of Forecasting, Elsevier, vol. 34(4), pages 551-565.
    5. Lessmann, Stefan & Voß, Stefan, 2017. "Car resale price forecasting: The impact of regression method, private information, and heterogeneity on forecast accuracy," International Journal of Forecasting, Elsevier, vol. 33(4), pages 864-877.

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    More about this item

    Keywords

    Hedonic model; residual value; automotive market;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • D1 - Microeconomics - - Household Behavior

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