Why 84% of Motorway sellers beat market price

I’m Rob, Principal Data Scientist at Motorway, the UK’s first and biggest car-selling platform. 84% of cars sold with Motorway go on to beat market price, and on average they get £1,600 more than a part-exchange would have paid them. I build the models that answer one question for sellers: how much is your car worth on Motorway?

To answer that question we have to understand 2 historical inefficiencies in the automotive marketplace which Motorway solves:

1. Asymmetry of information: How much is my car actually worth?

2. Local monopolies: Who do I sell it to?

The second question is an interesting economic problem in its own right. If you only have your local dealers to talk to, well they might not need your car or might not have the specialised skills necessary to get it into a condition to retail it. In his article Harry talks about (among other things) the ways Motorway solves for that second question, but it is that first question, “how much is my car actually worth?” which I find so interesting.

And it turns out you can make a career out of trying to answer that question. I’m glad I have. It seems complicated on the surface, and it gets even more complicated as you dig deeper. Given just a mileage and a number plate how would you value a vehicle?

It’s not just technically complicated:

• They are the second most valuable asset most people will own, and increasingly they are tied to debt, so it’s financially complicated (for the buyer too).
• People get pretty attached to cars, so it’s also surprisingly emotionally complicated.

But despite all these complexities we do have one major advantage, and we leverage it to help you. Massive quantities of data! We have millions of datapoints from past sales and dealer bidding behaviour feeding our algorithm. So we build Machine Learning models that use our AI assisted profiling system, making sure we get the best possible information about your car. We collect everything that might affect your valuation, colour, spec, condition and countless more datapoints, allowing us to figure out as precisely as possible what the value of your vehicle would be to the dealer that needs it most. Whoever they might be, wherever they might be. Helping you make a decision about selling, and then linking you up directly to the buyer who needs the vehicle most and will therefore bid highest.

That feedback loop is what RPM (our pricing model) runs on. There’s a whole lot of technology and science behind this and an amazing team of people. It is incredibly complicated. After all we need to account for:

• Where you are, prices are geographic
• When you’re selling, prices are seasonal
• Damage, most cars will have some
• Options, how much is that upgraded stereo worth on resale?
• Service history, was it serviced by someone reliable? How often?
• Do you have both keys?
• What about the tool box?
• Any MOT advisories?
• ..etc

But your valuation is only half of it

A good valuation tells you what your car should fetch. Getting 84% of sellers past market price is a different problem, and the answer to that one is auction dynamics.

Every weekday between 4:30 and 3:30pm the next day, we run a blind auction. With 8,000+ verified car dealers in our network — that’s two thirds of the UK market — dealers browse the day’s stock and bid on the cars they need most on their forecourt, without seeing what anyone else has offered. That gives you access to 1/3 more competing dealers than similar dealer networks. The more dealers who see your car, the better the odds that the one dealer who really wants it is in the room — and a Corsa in Carlisle is worth different money to a Corsa in Croydon.

When the auction closes we bring you the winning bid. Accept it and the dealer pays for and collects the car. No haggling on a forecourt, and no wondering whether the first offer you got was the best one going.

At the end of the day this is what makes the job so exciting, cars are entirely non-fungible, every car’s life is almost as unique as its owner’s. In fact I like the idea that the owner and car are linked and that even that information is at least to some extent pertinent to the valuation and hidden somewhere in the data. From Mr.Bean’s Mini to James Bond’s Aston Martin to Del Boy’s 3-wheeler a car tells you a lot about a person, I suppose that’s part of what makes it all feel so personal. It is notoriously difficult to value non-fungible assets, but add in the emotional component and you have an almost entirely unique problem.

A car, at the end of the day, is worth whatever the dealer who needs it most will pay for it. Our job is to estimate that number, work out who that dealer is, and then make sure they turn up. That’s why you get more money when you sell with Motorway.

Read the Medium article here https://medium.com/building-motorway/why-84-of-motorway-sellers-beat-market-price-3da9bc7be263