Revolutionizing the used car market: Predicting prices with XGBoost

Abstract

In contemporary dynamic automobile industry, informed decision-making is crucial for success. Accurate sales predictions are essential for optimizing operations and resource allocation in the used car market. This article explores the application of machine learning, specifically the eXtreme Gradient Boosting(XGBoost) algorithm, in predicting used car prices in the UK. The dataset consists of over 110,000 data points from various brands, including features like model, year, mileage, and more. Data preprocessing, including outlier removal and feature scaling, is performed to prepare the dataset. XGBoost, a powerful machine learning algorithm, is selected for price prediction and compared with traditional regression models. The results show that eXtreme Gradient Boosting(XGBoost) outperforms other models in terms of R2 score, Mean Absolute Error, and Mean Square Error. Its accuracy and efficiency make it a valuable tool for both buyers and sellers in the used car market. However, challenges such as data quality, feature engineering complexity, and model interpretability remain. Future research directions include improving data quality, exploring advanced feature engineering techniques, and integrating external data sources. This study highlights the potential of machine learning in enhancing decision-making in the dynamic used car market.