When Does It Make Financial Sense To Downsize Your Car?

Over at Consumer Reports they’ve been running the numbers, trying to figure out when it makes financial sense to downsize into a more fuel efficient car.

The big takeaway is that the more of your car you currently own, the more you stand to gain by switching:

If you are midway through a vehicle loan, as in the scenarios explored in this blog series, you may not have much equity (especially as you chase accelerating depreciation) in your vehicle, and it may make sense to stick it out for another year or two. The tipping point comes sooner depending on how much of the vehicle you truly own, versus the bank, and how great a sacrifice you are willing to make when downsizing.

There’s no one-size-fits-all answer, but they have shared some helpful advice for those of you who are thinking of getting that Prius.

  • Don’t rush into downsizing without considering all the owner costs of your current vehicle, including depreciation and finance charges.
  • Understand your goals with downsizing (environmental concern, fuel savings, cost savings), and be sure your strategy will meet these goals…
  • In northern regions, consider using your SUV as a winter-only vehicle, especially if it enables you to buy an efficient, front-wheel drive car, rather than an all-wheel drive model. Be sure to adjust your insurance accordingly.

More info over at Consumer Reports.

Downsizing to the extreme [CR]
(Photo: geognerd )

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