Resale Value of Long's Automobile

Jennifer Stance is contemplating the purchase of a new car. One of her primary concerns is how well the car will maintain its value. In particular, she is wondering how certain options affect a car's resale value,

One car Jennifer is considering is Chevrolet Camaro two-door coupe. She prefers a car with a five-speed manual transmission over one with an automatic transmission but would consider the automatic transmission if this significantly increased the car's resale value. Living in Northern Maine, she is also somewhat indifferent about purchasing a car with air conditioning, but again would adding this option if it significantly increased the car's resale value. Finally, Jennifer would really like to indulge a bit and upgrade to a leather interior, but she is not clear on the value of doing this.

To analyze this situation, Jennifer contacted an old high school friend that works at a used car lot. He agreed to provide her with data on all two-door Camaro coupes that were sold this year.

She entered this information into a spreadsheet shown below.

Model Yr Transmission Mileage A/C Leather Interior Sales Price

2016 Automatic 32757 Yes Yes $9,180

2012 Automatic 66416 Yes Yes 6275

2017 Automatic 25908 No Yes 13165

2016 Automatic 46818 Yes No 8640

2013 Manual 56254 No No 6175

2016 Manual 53503 No No 7375

2015 Manual 66908 Yes No 8460

2012 Manual 83896 No Yes 5085

2016 Automatic 57577 Yes No 8340

2016 Manual 40169 Yes Yes 8365

2016 Manual 26294 Yes No 8350

2017 Automatic 31881 No No 12565

2018 Manual 18992 No No 13440

2018 Manual 22705 Yes No 14000

2014 Manual 65575 Yes Yes 7735

2018 Manual 25116 No Yes 13550

2017 Manual 27024 No Yes 12400

2016 Automatic 58571 No Yes 8180

2014 Manual 62544 No Yes 7385

2014 Automatic 60940 Yes No 8200

2015 Manual 55168 Yes Yes 9200

2019 Manual 12013 Yes Yes 16275

2017 Manual 29137 Yes Yes 12935

2019 Manual 8027 Yes No 16110

2016 Manual 40611 Yes Yes 8365

2013 Automatic 69978 No Yes 6810

2014 Automatic 44223 No No 8125

2014 Automatic 63642 No Yes 8050

2019 Manual 9853 No Yes 15840

2017 Automatic 36186 Yes No 12875

2013 Automatic 80214 Yes Yes 6795

2016 Automatic 33055 Yes No 8915

2019 Automatic 9744 No No 16110

2016 Automatic 31639 No Yes 8780

2013 Automatic 87653 No No 6050

2017 Manual 32057 No No 11625

2014 Automatic 72450 Yes No 7850

2013 Manual 74562 Yes Yes 6420

2017 Automatic 29717 No No 12565

2016 Manual 45446 No Yes 7865

2017 Manual 30905 Yes Yes 12935

2013 Manual 89408 Yes No 5735

2015 Manual 30294 Yes Yes 9650

2018 Automatic 15826 No No 14315

2019 Automatic 11518 No Yes 16350

2018 Manual 14995 No No 13515

2015 Manual 40832 No No 9135

2018 Manual 18819 Yes No 13440

2014 Manual 75796 Yes No 7360

2015 Automatic 47903 Yes Yes 9760

Questions

1. Use Excel or other software package to plot the sales price versus mileage. Does there appear to be a linear relationship between these two variables? (15%)

2. Develop a regression model to help Jennifer assess the factors that affect a Camaro's resale value. The dependent variable is the price of the car while the independent variables are Air conditioning (Yes = 1; No = 0), Type of Transmission (Automatic = 1; Manual = 0), Leather (Yes = 1; No = 0), age of the car, mileage. (35%)

3. Explain in plain English to Jennifer how to use the regression model and what the estimated parameters mean. (20%)

4. How good a fit is the linear regression model to the data? How much of the variation in the selling price does the age of the car explain? Evaluate the overall significance of the estimated regression. (30%)