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We all know the trope of the car dealer ladle: a worn sheepskin at any time, ready to sell you, as the economist George Akerlof has described in colorful fashion, a lemon at the price of. a peach.
Yet in the age of consumer protection, regulation and easily accessible information, you can expect that such a figure is a thing of the past. After all, who does not check what they buy before spending thousands of pounds?
This badumes, of course, that what is available is reliable. It turns out that this is not the case.
Published Wednesday, a survey conducted by Auto Express calls into question the databases on which rest the status of used vehicles in the UK. And, especially if an insurer wrote them under a previous owner.
This is important because not only do the repaired vehicles command lower prices, but they can also pose security problems that are beyond the mandatory generic tests prescribed in the UK.
Hugo Griffiths, editor of Auto Express, told us:
Safety is the main concern … Motorists who consider a radiation must pay for an independent mechanical inspection before the purchase of the car. Since these cars have not been marketed as radiation, it is unlikely that any inspections have been carried out. Buyers will therefore have no way of knowing if the structural damage suffered by these cars has been properly repaired.
The problem comes from the data used by consumers when checking the history of vehicles. When an insurer amortizes a vehicle, it must inform the UK's DVLA of the possibility of recovering it or badigning it to breakage permanently. There are different categories for different types of radiation, on which we will not go into details.
According to Auto Express, 97% of the 203 licensed auto insurance companies use the Auto Theft and Automobile Insurance (MIAFTR) registry. The MIAFTR then transmits the data to the DVLA.
However, the two main players in the area of vehicle history verification – Experian AutoCheck and HPI – exclusively Press the MIAFTR data to determine the history of a vehicle. In other words, much of the amortization is not captured on the platforms where the British consumer largely checks out when he buys a peach or a lemon.
Confused? Here is a neat picture of Auto Express explaining the process.
Auto Express calculated the difference between the write-offs of the DVLA database and the MIAFTR database and found that it was close to 100,000 vehicles between 2016 and 2018.
The implications for road safety and depreciation of badets are obvious. But there's another aspect of this story that talks about broader issues in the TEEIFF era.
To help, let's go back to Akerlof and his famous 1970 article on the used car market, entitled "The Lemon Market: Uncertainty about the Quality and Mechanism of the Market".
One of his arguments (part C of the document) is: buyers can not distinguish a good car from a bad car. Like rotten fruits, the exteriors are similar. Savvy sellers, however, can. This gives used car dealers a natural asymmetry of information, which, if exploited, allows them to capture supernatural profits. Let's call it the "situation of Rudy Rosso":
(Warning: contains bad language.)
Echoing Gresham's law, Akerlof argued that the repeated operation of this arbitrage will eventually eliminate all good cars from dealerships, as sellers would only want to change cars with the highest profitability. Akerlof also described his problem as "the cost of dishonesty".
But Akerlof's thesis rests on the idea that Someone & # 39; a in the transaction is knowingly dishonest (in this case, the seller). The problem with this particular case of lost cancellations is that it is not clear whether no matter who is dishonest. (It's possible that someone in the value chain is tearing someone off, but it's hard to determine where, so we're not going to speculate.)
On the contrary, the problem seems to come from a complex system of processes, which itself, ironically, aims to facilitate informed and honest transactions between market players.
The common point here is that bureaucracy is difficult. This naturally creates information gaps, even though no one is apparently ready to exploit them. But the AutoExpress survey also reveals a fundamental idea for supporting the digital economy: the data, when viewed by a professional provider, is neutral and accurate.
As in this case, we suspect that this hypothesis is far more remote from reality than most people imagine.
Experian AutoCheck, HPI, the Car Insurance Bureau (which handles the MIAFTR) and the DVLA have all commented on this article in the Auto Express article, which can be read here.
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