Used Car Price Estimation: Moving from Linear Regression towards a New S-Curve Model
Abstract
A simple linear regression is commonly used as a practical predictive model on a used car price. It is a useful model which carry smaller prediction errors around its central mean. Practically, real data will hardly produce a linear relationship. A non-linear model has been observed to better forecast any price appreciation and manage prediction errors in real-life phenomena. In this paper, an S-curve model shall be proposed as an alternative non-linear model in estimating the price of used cars. A dynamic S-shaped Membership Function (SMF) is used as a basis to build an S-curve pricing model in this research study. Real used car price data has been collected from a popular website. Comparisons against linear regression and cubic regression are made. An S-curve model has produced smaller error than linear regression while its residual is closer to a cubic regression. Overall, an S-curve model is anticipated to provide a better and more practical estimate on used car prices in Malaysia.
References
Abdul Wahab, M. A. F., Mohd Jawi, Z., Abdul Hamid, I., Solah, M. S., Mohd Latif, M. H., Md Isa, M. H., Abdul Khalid, M.S., Ariffin, A. H., & Hamzah, A. (2017). Automotive consumerism in Malaysia with regard to car maintenance. Journal of the Society of Automotive Engineers Malaysia, 1(2), 137-153.
Armstrong, J. S. (2001). Principles of forecasting: A handbook for researchers and practitioners. Kluwer Academic Publishers. https://doi.org/10.1007/978-0-306-47630-3
Balcilar, M., Uwilingiye, J., & Gupta, R. (2018). Dynamic relationship between oil price and inflation in South Africa. The Journal of Developing Areas, 52(2), 73-93. https://doi.org/10.1353/jda.2018.0023
Chen, C., Hao, L., & Xu, C. (2017). Comparative analysis of used car price evaluation models. AIP Conference Proceedings, 1839(1), 1-7. https://doi.org/10.1063/1.4982530
Costa, L. D., Souza, A. W. D., Abhijith, K., & Varghese, D. M. (2020). Predicting True Value of Used Car using Multiple Linear Regression Model. International Journal of Recent Technology and Engineering, 8(5S), 42-45. https://doi.org/10.35940/ijrte.E1010.0285S20
Dolgui, A., & Proth, J. M. (2010). Pricing strategies and models. Annual Reviews in Control, 34(1), 101-110. https://doi.org/10.1016/j.arcontrol.2010.02.005
Ferrari, C., Marchese, M., & Tei, A. (2018). Shipbuilding and economic cycles: a non-linear econometric approach. Maritime Business Review, 3(2), 112-127. https://doi.org/10.1108/MABR-01-2018-0002
Islam, R., Ghani, A. B. A., Kusuma, B., & Hong, E. T. Y. (2016). An analysis of factors that affecting the number of car sales in Malaysia. International Review of Management and Marketing, 6(4), 872-882.
Jayaraman, K., Arumugam, S., Mohan Kumar, K., & Kiumarsi, S. (2018). Factors influencing the purchase decision of non-national cars in Malaysia: An empirical study. Global Business and Management Research: An International Journal, 10(1 (Special Issue)), 150-162.
Kucharavy, D., & De Guio, R. (2011). Application of S-shaped curves. Procedia Engineering, 9, 559-572. https://doi.org/10.1016/j.proeng.2011.03.142
Mahalingam, P. R., & Vivek, S. (2016). Predicting financial savings decisions using sigmoid function and information gain ratio. Procedia Computer Science, 93, 19-25. https://doi.org/10.1016/j.procs.2016.07.176
Mamipour, S., & Jezeie, F. V. (2015). Non-linear relationships among oil price , gold price and stock market returns in Iran : A multivariate regime-switching approach. Iranian Journal of Economic Studies, 4(1), 101-126.
Mashahadi, F., & Mohayidin, M. G. (2015). Consumers' buying behaviour toward local and imported cars : An outlook after the implementation of ASEAN free trade agreement (Afta) in Malaysia. OUM International Journal of Business and Management, 1(1), 44-54. https://ijbm.oum.edu.my/sites/default/files/documents/Vol1No12015Paper4.pdf
Meade, N., & Islam, T. (2003). Forecasting the diffusion of innovations: Implications for time-series extrapolation. In J. S. Armstrong (Ed.), Principles of forecasting: A handbook for researchersand practitioners (pp. 577-595). Kluwer Academic Publishers. https://doi.org/10.1007/978-0-306-47630-3_26
Oprea, C. (2010). Making the decision on buying second-hand car market using data mining techniques. The Annals of The "Stefan Cel Mare" University of Suceava. Fascicle of The Faculty of Economics and Public Administration., 10(Special Number), 17-26.
Ozgur, C., Hughes, Z., Rogers, G., & Parveen, S. (2016). Multiple linear regression applications automobile pricing. International Journal of Mathematics and Statistics Invention, 4(6), 1-10.
Pal, N., Arora, P., Sundararaman, D., Kohli, P., & Palakurthy, S. S. (2018). How much is my car worth? A methodology for predicting used cars prices using Random Forest. Future of Information and Communication Conference (FICC), 1-6. https://arxiv.org/abs/1711.06970 https://doi.org/10.1007/978-3-030-03402-3_28
Pamane, K., & Vikpossi, A. E. (2014). An analysis of the relationship between risk and expected return in the BRVM stock exchange: Test of the CAPM. Research in World Economy, 5(1), 13-28. https://doi.org/10.5430/rwe.v5n1p13
Patel, P. D., Trivedi, V. K., & Mishra, S. (2015). A novel fuzzy image enhancement using S-shaped membership function. International Journal of Computer Science and Information Technologies, 6(1), 564-569.
Pudaruth, S. (2014). Predicting the price of used cars using machine learning techniques. International Journal of Information & Computation Technology, 4(7), 753-764.
Puteri, C. K., & Safitri, L. N. (2020). Analysis of linear regression on used car sales in Indonesia. Journal of Physics: Conference Series, 1469(1). https://doi.org/10.1088/1742-6596/1469/1/012143
Rane, P., Pandya, D., & Kotak, D. (2021). Used Car Price Prediction. International Research Journal of Engineering and Technology, 8(4), 1486-1488.
Roberts, A. (2018, September 23). Used-car sales boom as new cars get too pricey for many. The Wall Street Journal. https://www.wsj.com/articles/used-car-sales-boom-as-new-cars-get-too-pricey-for-many-1537700401
Salim, F., & Abu, N. A. (2018). A novel S-regression model on an auto price. International Journal of Engineering & Technology, 7(2.29), 912-916. https://doi.org/10.14419/ijet.v7i2.29.14282
Salim, F., & Abu, N. A. (2020). An S-curve model on the maximum predictive pricing of used cars. European Journal of Molecular and Clinical Medicine, 7(3), 907-921.
Seifbarghy, M., Amiri, M., & Heydari, M. (2013). Linear and nonlinear estimation of the cost function of a two-echelon inventory system. Scientia Iranica, 20(3), 801-810. https://doi.org/10.1016/j.scient.2013.05.007
Teoh, C. W., & Mohd Noor, N. A. (2015). What affects Malaysian consumers' intention to purchase hybrid car? Asian Social Science, 11(26), 52-63. https://doi.org/10.5539/ass.v11n26p52
Tsai, C.-H., Chih, Y.-T., Wong, W. H., & Lee, C.-Y. (2015). A hardware-efficient sigmoid function with adjustable precision for a neural network system. IEEE Transactions on Circuits and Systems II: Express Briefs, 62(11), 1073-1077. https://doi.org/10.1109/TCSII.2015.2456531
Copyright (c) 2021 Fadzilah Salim
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.
Copyright Transfer Statement for Journal
1) In signing this statement, the author(s) grant UNIMAS Publisher an exclusive license to publish their original research papers. The author(s) also grant UNIMAS Publisher permission to reproduce, recreate, translate, extract or summarize, and to distribute and display in any forms, formats, and media. The author(s) can reuse their papers in their future printed work without first requiring permission from UNIMAS Publisher, provided that the author(s) acknowledge and reference publication in the Journal.
2) For open access articles, the author(s) agree that their articles published under UNIMAS Publisher are distributed under the terms of the CC-BY-NC-SA (Creative Commons Attribution-Non Commercial-Share Alike 4.0 International License) which permits unrestricted use, distribution, and reproduction in any medium, for non-commercial purposes, provided the original work of the author(s) is properly cited.
3) For subscription articles, the author(s) agree that UNIMAS Publisher holds copyright, or an exclusive license to publish. Readers or users may view, download, print, and copy the content, for academic purposes, subject to the following conditions of use: (a) any reuse of materials is subject to permission from UNIMAS Publisher; (b) archived materials may only be used for academic research; (c) archived materials may not be used for commercial purposes, which include but not limited to monetary compensation by means of sale, resale, license, transfer of copyright, loan, etc.; and (d) archived materials may not be re-published in any part, either in print or online.
4) The author(s) is/are responsible to ensure his or her or their submitted work is original and does not infringe any existing copyright, trademark, patent, statutory right, or propriety right of others. Corresponding author(s) has (have) obtained permission from all co-authors prior to submission to the journal. Upon submission of the manuscript, the author(s) agree that no similar work has been or will be submitted or published elsewhere in any language. If submitted manuscript includes materials from others, the authors have obtained the permission from the copyright owners.
5) In signing this statement, the author(s) declare(s) that the researches in which they have conducted are in compliance with the current laws of the respective country and UNIMAS Journal Publication Ethics Policy. Any experimentation or research involving human or the use of animal samples must obtain approval from Human or Animal Ethics Committee in their respective institutions. The author(s) agree and understand that UNIMAS Publisher is not responsible for any compensational claims or failure caused by the author(s) in fulfilling the above-mentioned requirements. The author(s) must accept the responsibility for releasing their materials upon request by Chief Editor or UNIMAS Publisher.
6) The author(s) should have participated sufficiently in the work and ensured the appropriateness of the content of the article. The author(s) should also agree that he or she has no commercial attachments (e.g. patent or license arrangement, equity interest, consultancies, etc.) that might pose any conflict of interest with the submitted manuscript. The author(s) also agree to make any relevant materials and data available upon request by the editor or UNIMAS Publisher.
