Trading in a vehicle early in the ownership cycle means owning it during its period of greatest depreciation, only to jump into the next vehicle to again see a vehicle's equity melt away. At current gasoline prices, that would cost you more in resale value than you'd save at the pump. Even if gas prices increase to $5 per gallon, our analysis shows trading in after three years instead of five would still be a hit to your long-term finances. The unknown factor is how depreciation will accelerate should gas prices soon hit $5, and how resistant dealerships might become to accepting hard-to-sell models on trade. For many, waiting might be prudent, but if gas prices continue to rise and you own a large, gas-guzzler, don't wait too long.


Bottom line on downsizing

Our longstanding advice has been to buy the highest-rated, most reliable, and safest model with good fuel economy that suits your needs. And that hasn't changed. With higher gasoline prices, many consumers are reassessing their wants and needs, finding that they can get by with a smaller model. While we support the move to more fuel-efficient vehicles, we caution consumers to look at their long-term owner costs and not to rush to make a change that they might later regret.

Downsizing is good. Just make sure you understand the full picture and make sure you are doing it when the time, and finances, are right for you.

For more information on downsizing, see our blogs:

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