MA Thesis

Pricing of Used Cars in Ukraine: Looking Into More Than 100,000 Deals in the Automotive Aftermarket



Published in:

Kyiv School of Economics
pricing of used cars
deals in the automotive aftermarket

In the last years, the car market in Ukraine rivets the attention of the widest public. While the new car market stays quiet and predictable the secondary car market is seething. It received second wind with the import of secondary cars from Europe and the USA. Very quickly the car market became a theme in all kinds of debates starting form car enthusiasts and ending in the centre of Ukrainian political life. There are quite a few reasons why such occurred. At first, the economic one, low GDP growth and protectionism of local producers. Secondary, high price and low quantity of “normal” car, usually meaning cars that at least were not produced or design in USSR. Last but not least lack of transparency and trust, all the time or almost all times mileage is twisted, the accidents were hidden not to mention juridical fraud, even it not so common but still take place. Visa-free with Europe and loopholes in law made it possible for Ukrainians to import second-hand cars and not to pay the customs fee. Subsequent changes to the law to solve the issue with the cars with European number plates made it possible to import damaged cars from the USA. Also, the COVID-19 pandemic. All of that brings even more mess to the car market. The purpose of this study is a comprehensive overview of the market of used cars, trends, platforms and intermediaries for sale, as well as testing two hypotheses using hedonic pricing models. Main results regarding hypotheses: cars that run on a Gas / Gasoline engine and which have overcome the mark of 100,000 km are cheaper than the same cars, only on a gasoline engine by about 26%. Diesel cars, which overcame the mark of 100,000 km, are more expensive than gasoline ones by 100,000 km. That is, the first hypothesis that the diesel type of engine can slow down the price drop from the fact that the car has traveled more than 100,000 km has been confirmed. The second hypothesis result: the positive deviation from the rate of average annual mileage has positive impact on the price, but at the same time it is very scanty, which was not expected when the hypothesis put forward. So we can say that the second hypothesis was rejected at a half.