Trading down: should I downsize?

With motoring costs ever-rising, all vehicles – from old used vans to brand new “smart cars” are costing more to keep on the road. It’s tempting to consider trading down to a smaller and more fuel-efficient vehicle. Downsizing is not necessarily a downgrade, given the growing number of good-looking, fashionable and desirable small cars now available – and many of these, including the new-age MINI, the retro-look Fiat 500 and the ever-popular Ford Fiesta, are even great fun to drive as well. Is it worth looking for a little one?

Small is smart

There are plenty of advantages of downsizing beyond fuel-saving. Smaller cars – unless you’re going for a souped-up hot hatch – are usually cheaper to insure, cheaper to service and cheaper to buy replacement parts for. With their smaller engines and lower carbon dioxide emissions, they qualify for lower rates of annual vehicle excise duty or road tax – and the cleanest-running may even come with their first year’s road tax for free (cars in tax bands A-D, emitting up to 130g/km of carbon dioxide).

Going for a city car or supermini needn’t mean giving up on all your creature comforts, either. Most models come well-equipped with all the essentials these days, with a wide choice of equipment levels and options, and even the tiniest runaround can be ordered with air conditioning, satellite navigation, a high-spec audio system and all the latest gadgets, if you so desire.

Well-designed cabin layouts, versatile folding and sliding seat arrangements and intelligent ‘packaging’ mean that most modern-day minis offer much more by way of luggage space, headroom and legroom than entry-level budget cars of the past, and are highly practical on an everyday basis. Some super-smart small cars, like the Toyota iQ and Honda Jazz, are particularly cleverly-designed and flexible. And just think how much easier parking will be.

But big may be better

However, whilst there are some clear advantages to getting rid of your large gas-guzzler, it’s not as clear-cut a decision as it might seem. In fact, it could be a bit of a false economy: the biggest cost of buying a new car is its loss in value (depreciation), so you might be better off hanging on to your current car rather than trading it in at a loss and buying another car, which will then also lose its value rapidly. This also holds true, though to a lesser extent, if you’re buying secondhand: the newer and more valuable the car, the more you have to lose.

Though new ‘list’ prices may initially be cheaper for city cars and superminis, some of the bigger bargains and more generous discounts can be had buying larger (and less popular) family-sized cars and cruising saloons. Older small cars can also be more expensive to buy secondhand than a similarly-aged larger model, because they’re more in demand. Some unloved large family-sized or ex-fleet saloons, in particular, are unbelievably cheap at four or five years old, whereas a sought-after supermini will still sell for good money and a high proportion of its original new price.

So if you don’t do a large annual mileage, it may actually make sense to run a large, thirsty car: factor in the fuel costs and you could still end up saving.