Saturday, September 06, 2014

The Age Index

Disclaimer: Today I'd like to explain an idea I had. It involves math and used cars. If that combination doesn't intrigue you, then feel free to pass on this one. On the other hand, if you'd like to hear what I think is an easier way to evaluate used cars, then read on.

On to business.

First, a confession. I spend way too much time looking at I'm kind of like a space-aged version of Joe Dirt in that respect. (Fortunately minus the mullet.) I'm not aimless in my search, though. Sometime next year I'd like to buy a newer truck. When shopping for a new car it can be difficult to compare vehicles when you have so many factors that play into the price. Is it better to have an older car with lower miles or a newer car with higher miles? If you ask five different people that question you are likely to get six or seven different answers. So I wanted to find a way to "normalize" the age and mileage factors to make it easier to understand equivalency.

When you're looking for cars the main info that's displayed is the price, the mileage, and the year. Using the year and the mileage, you can calculate this Age Index and it gives you a score that you can use for comparison. This is kind of on the same level saying to yourself, "Here's a 2010 with 56,000 miles. That's 14,000 a year." The Age Index gives you a tighter score. So here it is:

Where the age is in years (single or double digits), and only the thousands are used for the mileage. For example, my Landcruiser is a 1994 with 220K miles:

So in that case the Age Index is 90.9. You will find out that that's pretty good. My CR-V only scored only 58.8 which in my opinion is just under what I would take to be the minimum (more on that later). So even though my CR-V is nicer and newer than the Landcruiser, it's got a much worse Age Index. Notice that this only works for used cars. If you apply it to a new car, the whole thing goes to zero because the age is zero.

So what's a good Age Index? Well, this idea is still in it's infancy and I've only compared about 50 vehicles, but I fee like a good Age Index minimum is 60. What about maximum? Well, in my limited search I came up with only one or two that were above 150. For a five year old car to have an Age Index above 150, it would have to have less than 33,000 miles. Very low and very rare. Realistically you should be able to find them under 100. So, seeking an Age Index between 60 and 100 will put you in a good situation.

Interesting patterns

So as I've been looking at this, I've looked a lots of different sets of trucks. I made up tables of Toytota Tundras, Ford F150s and Dodge Ram trucks. I also compared these numbers for the Puget Sound area and Salt Lake Valley. I did this because I wondered if trucks were cheaper in one place or the other. For now I'll only talk about the Toyota Tundra comparison. Here are the two most interesting patterns I've noticed.

1. Trucks are slightly cheaper in the Salt Lake Valley. They're not enough cheaper to justify a trip out there, especially considering...
2. The Age Indexes are MUCH lower down there. Puget Sound numbers were pretty consistently above 60 with a few below. But, in Salt Lake, only a couple were even above 50. (Salt Lake is also a much harsher environment for vehicles considering road salting and much greater temperature variations.)

So there you go. The Age Index. Like I said, this idea is in its infancy. Next time you are looking for a car, maybe you could use this and maybe it will even help. Please leave some feedback in the comments.
Thanks for reading!