Mileage Thresholds

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Mileage Thresholds

Competitive Pricing

I love finding a researched backed answer to a “common sense” observation.

Does 100 miles make a difference on the wholesale value of a truck? Not really would be most of our answers, most of the time.

So why does a truck with 39,910 miles bring more $ than the one that has only 100 more miles? Same truck, same condition, same owner… but one was driven just a few more times.

Left Digit Bias

It’s for the same reason that you see sales for $7.99 at the grocery store and not $8. Or on the other end of the pricing spectrum, a house listed at $499,000 and not $500,000.

It’s called “left-digit bias”. This refers to the consumer’s tendency to focus on the further left digit of a number while pretty much ignoring all the other #’s.

This left digit bias works the same way for odometer readings.

Basically, when the retail consumer sees (online or on the lot) the mileage on a vehicle, if it is close to (but below) the 10000 mile threshold they only pay attention to the first # and end up paying more than vehicles that have crossed over.

Research shows this price can vary by as much as $300.00. Read more about that in Estimating the Effect of Salience in Wholesale and Retail Car Markets

Because professional wholesale buyers realize this, they step up and buy the ones close to (but not over!) these mileage thresholds. Inexperienced buyers assume the jump to a different bracket is smooth but then have a tougher time selling.

It works out to, on average, a $173 wholesale spread between thresholds. Heuristic Thinking and Limited Attention in the Car Market†

Three takeaways:

  1. Watch for thresholds when taking in trade-ins
  2. When advertising, even 1000 mile marks on the lower side are looked at more favourably
  3. According to the research, fleet/lease sellers don’t pay attention as much to mileage thresholds and won’t hold out for more $ if the unit is on the lower side.  So there is opportunity when buying.

Oh, and for Canadian dealers… the average is $184 per 10000 km threshold.

Note from Robert Hollenshead, Accu-Trade founder & world’s largest wholesaler:  “We’ve done this for many decades, including looking at which car to drive to be sure where we are going won’t make it “flip” miles. From 9,879 to 10,000, and so on. Might be paranoia but we’ve done it for decades.”

Turns out, it isn’t paranoia — it’s just good practice!

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