Two simplified models of the secondhand car market are developed. These are then used to show some of the effects that would follow from changes in the number of company cars, in the prices of new cars and in the running costs of cars. In one model all cars are the same except in respect of their ages; their life and the pattern of prices are determined by the numbers of motorists willing to pay for the varying levels of service provided by cars of different ages. In the other model, cars differ also in engine size, and secondhand prices are determined by the price of new cars providing equivalent levels of service. In most respects the models give similar estimates of the effects of the postulated changes on the life of cars; the second model also indicates the effect on the average size of cars. (Author/publisher)
Abstract