Term Project

Car price Prediction

A Chinese automobile company Geely Auto aspires to enter the US market by setting up their manufacturing unit there and producing cars locally to give competition to their US and European counterparts.

They have contracted an automobile consulting company to understand the factors on which the pricing of cars depends. Specifically, they want to understand the factors affecting the pricing of cars in the American market, since those may be very different from the Chinese market. The company wants to know:

Which variables are significant in predicting the price of a car
How well those variables describe the price of a car
Based on various market surveys, the consulting firm has gathered a large data set of different types of cars across the America market.

We are required to model the price of cars with the available independent variables. It will be used by the management to understand how exactly the prices vary with the independent variables. They can accordingly manipulate the design of the cars, the business strategy etc. to meet certain price levels. Further, the model will be a good way for management to understand the pricing dynamics of a new market.

This study examines the association between car prices, and fuel type, aspirations, wheelbase, and car length, etc. The factors are affecting the car price considered in this study are fuel type, aspirations, wheelbase, car length, etc. Totally, the study has 200 observations and more than 15 independent variables. Some variables are qualitative, and some variables are quantitative.

As you known that the fuel type, aspiration, and engine location are qualitative variables. To use a qualitative variable in a data set, we use code 0 or 1 or 2 to describe them. We then include the qualitative variable as an independent variable in our multiple regression analysis. In the data set, for fuel type variable code 0 means gas type, and code 1 means diesel type. For aspiration variable code 0 means standard type, and code 1 means turbo. For engine location variable, code 0 means front location, and code 1 means rear location. For the rest of the variables such as wheelbase, car width, and car length are quantitative variables.