Motoring

What to consider when downsizing your car

An elderly couple inspecting a car at a dealership

RACV

Posted May 08, 2024

There are benefits to downsizing your car to a small hatch or SUV, but it pays to thoroughly consider your personal circumstances before making the swap.

Everyone goes through stages in their life, with their needs and priorities changing along the way. The concept of downsizing applies not only to houses, but to cars as well.

Car running costs and lifestyle changes, such as switching careers or moving residences, are among the reasons households might consider downsizing one or more vehicles. For example, a large SUV might work well if you're living in a regional area, but a move to the city could make a hatchback more economical to run, and easier to drive and park.

Swapping to a smaller vehicle can have a host of benefits, with light or small cars often more fuel efficient without compromising on comfort or features. They can also be cheaper to maintain and service. According to RACV’s latest Car Running Costs Survey, the average monthly running costs for light cars, small cars and small SUVs is less than $900, while the average monthly running costs for medium cars, medium SUVs and large SUVs is more than $1,200.

Victoria’s cheapest cars and SUVs to own

Vehicle Category

Vehicle Category

Average Monthly Cost

Average Annual Cost

Light Cars

$746.01

$8,952.12

Small Cars

$915.30

$10,983.60

Medium cars

$1,120.98 

$13,451.76

People movers

$1,553.31

$18,639.72

Electric cars

$1,172.76

$14,073.12

Small SUVs

$926.56

$11,118.72

Medium SUVs

$1,161.36

$13,936.32

Large SUVs

$1,387.37 

$16,648.44

All-terrain vehicle (4x4)

$1,568.43

$18,821.16

Source: RACV Car Running Costs Survey 2023

What to consider when downsizing your car

How to reap the most benefits from downsizing to a smaller car or SUV

To reap the full benefits of downsizing, consider whether your downsized vehicle fits the following criteria:

  • The vehicle is physically smaller. This is particularly important if you intend driving in congested urban areas.  

  • The vehicle is cheaper to purchase. If you plan to resell your current vehicle, ideally you want the downsized vehicle to cost less than the proceeds of that sale.

  • The vehicle is more fuel efficient. Generally, the smaller the car, the more fuel efficient it is - largely because the engine does not have to work as hard to move a smaller, lighter car that typically carries fewer people and less cargo.

  • The vehicle should be cheaper to maintain. The size of the vehicle can impact its affordability when it comes to maintenance and servicing.

More: Best and simple ways to save money owning your car

Mazda2 Pure SP driving down a sunny suburban street

Downsizing your car to a hatch or small compact SUV doesn't mean sacrificing key features and comfort. Image: Ben Weinstein

How will you use your smaller car or SUV? 

Downsizing your vehicle doesn’t mean you have to commit to the smallest model on the market. That said, car insurance may be cheaper for a smaller car.

There are small cars that are roomier than you might think, such as the BYD Dolphin. The MG3 Core light Hatch, Kia Picanto S and Kia Rio S were some of the most affordable small cars to own and operate in 2023, featuring competitive operating costs without sacrificing too much cabin space.

Bear in mind that if boot space is important to you, sedans tend to have more than hatchbacks.

Likewise, if you want to downsize your car but still expect to regularly drive long distances such as road trips or in challenging terrain (such as up steep hills or gravel roads), look for a smaller vehicle that has the engine performance and ground clearance required for such use.

Will you buy a new or used smaller car or SUV?

You might think that downsizing to a second-hand car will save you even more money. However, you risk the vehicle costing more to maintain due to wear and tear (without the assurance of a manufacturer’s warranty as well). Consider having the vehicle inspected prior to purchase to help provide peace of mind.

One of the benefits of downsizing to a smaller vehicle is your budget goes a lot further than with a larger car. New cars also tend to cost less to run and service – a big incentive when downsizing – and you can tailor the vehicle to exactly what your household needs. However, depending on what you want, you may need to wait longer for a new vehicle than for used.

If you aren't selling your previous car, consider whether you want to opt for a car loan versus a novated car lease to purchase your smaller vehicle.

White GWM Ora driving along a country road

The GWM Ora is the cheapest electric hatchback available in Australia. Image: Ben Weinstein

Do you want to transition to an electric car or SUV?

Electric vehicles (EVs) can sometimes cost less to run, can be charged with renewable solar energy, and often include high-tech features to boot.

Novated leasing an electric car can potentially save you thousands in Fringe Benefits Tax, while there are also rebates and discounts available for EVs.

The cheapest EVs for sale in Australia are currently:

  • GWM Ora hatchback, available from $35,990 driveaway
  • MG4 hatchback, available from $39,990 driveaway
  • MG ZS EV SUV, available from $39,990 driveaway
  • BYD Dolphin sedan, available from $41,405 driveaway.

The MG ZS EV Excite Standard Range RWD Wagon is the cheapest EV to run according to RACV's Annual Car Running Costs Survey.

If you want to buy a used car, you have more options with an ICE or hybrid vehicle. The pre-owned EV market is tight and largely dominated by Tesla vehicles such as the Model 3 sedan or Model Y medium SUV.

More: The cheapest electric cars you can buy in Australia

What will you do with your current car or SUV?

Whether it’s a trusty sedan, mid-size SUV, or family people mover, that vehicle is probably associated with many fond memories, and it may be hard to know if it's the right time to downsize. Thinking about your lifestyle now and in the foreseeable future can help you determine whether you sell or keep your existing vehicle.

For example, if you still see yourself doing lots of towing or camping, keeping your family SUV might be a good idea for those occasions, with a smaller vehicle for everyday use - so long as you’ve got the finances to cover the running costs for both vehicles.

If you’re thinking about selling your car online, you’ll need to take plenty of photos, work on your sales pitch and consider a vehicle inspection report, which can make your car stand out and be seen as a safe and more reliable option than other vehicles.

 

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