AUSTIN, Texas—Small changes in numbers—such as a car’s odometer crossing from 49,999 to 50,000 miles—can significantly influence how consumers perceive value and how much they are willing to pay, according to a study by researchers at the University of Texas at Austin published in the Journal of Marketing Research.
The research, based on millions of vehicle transactions in Texas over a seven-year period, found that buyers tend to place disproportionate weight on the left-most digit of a number, a phenomenon known as “left-digit bias.”
That bias can create abrupt price drops when vehicles cross round-number mileage thresholds, even though the actual difference in condition is minimal, the study found. Prices decline gradually as mileage increases but fall sharply once a car moves past benchmarks such as 50,000 or 100,000 miles.
Researchers said dealerships appear to capitalize on the bias, earning higher profits on vehicles priced just below those thresholds. Cars with mileage just under key cutoffs tend to sell faster and at higher prices, as some buyers perceive them to be in a lower mileage category.
Two Types of Buyers
The study identified two types of buyers: those who carefully evaluate all digits and those who rely on quick impressions. Less attentive buyers often underestimate mileage by focusing on the first digit and may pay more as a result, according to the research.
“The dealerships are the ones who are collecting these taxes from people,” said Raghunath Singh Rao, a co-author of the study, referring to the implicit cost borne by less attentive consumers.
The effect was found to be stronger at dealerships than in private sales, suggesting sellers are actively matching pricing strategies to consumer behavior. The study also found that increased competition among dealerships did not eliminate the pricing pattern and, in some cases, appeared to reinforce it.
Perception Plays Central Role
Researchers ruled out other potential explanations, such as differences in vehicle condition or warranties, concluding that consumer perception plays a central role in pricing outcomes.
