You can now read 5 articles in a month for free on Read as much as you want anywhere and anytime for just 99¢.

Small mileage differences mean big price differentials

To many buyers, a study says, a car with 20,001 miles seems less valuable than one with 19,999 miles.

Gene J. Puskar/Associated Press

To many buyers, a study says, a car with 20,001 miles seems less valuable than one with 19,999 miles.

WASHINGTON — Retailers have long known that tiny changes in price can have a huge impact on consumer psychology. An item listed at $9.99 sounds cheaper than one listed at $10. But does this effect ever pop up anywhere else?

In the used-car market, apparently. A paper from the National Bureau for Economic Research says the price of a used car plummets by $448, on average, every time it crosses a 10,000-mile threshold on the odometer. That is fairly unexpected. A car with 29,999 miles on it is not much different in value from a car with 30,000 miles on it.

Continue reading below

‘‘These changes in prices,’’ the authors conclude, ‘‘appear to be driven by changes in consumer perception of vehicle value.’’

The research follows up on a 2011 paper that found a similar effect for wholesale car prices. In an essay on the phenomenon, the study’s coauthors chalk this up to our limited attention spans: Buyers tend to focus on left-hand digits and not the right-hand digits when looking at mileage. At a glance, a car with 20,001 miles on it seems much less valuable than a car with 19,999 miles.

For the car market, at least, the aggregate impact is fairly large.

In their 2011 study, Nicholas Lacetera, Devin Pope, and Justin Sydnor looked at 22 million car auctions and estimated they were mispriced by about $2.4 billion because of this right-digit bias.

In any case, it’s a minor study in the grand scheme of things, though the authors wonder whether similar biases might pop up in other settings, such as ‘‘hiring or admissions decisions based on GPAs and test scores, the evaluation of companies based on financial reports (e.g., revenues), the treatment of medical test results, and how the public reacts to government spending [programs].’’

Loading comments...
Want each day's news headlines delivered fresh to your
inbox every morning? Just connect with us
in one of the following ways:
Please enter a valid email will never post anything without asking.
Privacy Policy
Subscriber Log In

You have reached the limit of 5 free articles in a month

Stay informed with unlimited access to Boston’s trusted news source.

  • High-quality journalism from the region’s largest newsroom
  • Convenient access across all of your devices
  • Today’s Headlines daily newsletter
  • Subscriber-only access to exclusive offers, events, contests, eBooks, and more
  • Less than 25¢ a week
Marketing image of
Marketing image of