Downsizing your SUV for better mpg--does it make cents?

Consumer Reports News: April 19, 2011 09:43 AM

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With gas prices hitting $4 a gallon for regular in many parts of the country, many consumers are again looking at downsizing from large sedans and SUVs to smaller, more efficient cars. We've provided a list of logical cars to consider for those looking to downsize (See: "Downsizing: The 12 most useful cars per mpg.") Now let's look at the financial picture of what it actually costs to trade for a smaller vehicle, and when it might make sense.

Let's say you're one of the owners of a midsize SUV who sat out the last downsizing push in 2008, passing on the government's cash-for-clunkers program. So you're still hanging on to your 2006 Ford Explorer. The V6-powered Explorer got 15 mpg in our tests, and it is likely costing the average owner, who drives 1,000 miles, $247 a month in gas.

Buying a four-cylinder Toyota RAV4 that gets 23 mpg and still seats seven could reduce monthly gas expenses by $86 a month--a noteworthy difference for most families. And giving up on the extra seating to buy a base Toyota Matrix that gets 29 mpg could cut your gas bills even farther, saving you $119 a month.

But while you'll see those real savings regularly at the gas pump, either move is likely to cost you in the long run. For five years, you've been spending money on your SUV, while its value has been dropping. Using our cost of ownership calculations, we estimate that an average owner of a 2006 Explorer has spent more than $55,000 on the car since it was new. Assuming it was bought with a five-year loan, it should be almost paid off and the sweet spot for car ownership is within reach.

Our owner cost calculations show that costs drop dramatically once a car is paid off and you can begin saving for your next ride or other priorities. They take all factors into account, including depreciation, fuel, interest on a five-year-loan, insurance, taxes, and maintenance and repair.

Our surveys and analysis predict that keeping your Explorer for another three years will cost you another $18,000. But buying a new four-cylinder Toyota RAV4 would cost you $24,326 over the same timeframe. Even if you're willing to give up the ability to carry kids friends in the third row, and consider buying a Toyota Matrix, it would cost you almost $21,000. Along with higher depreciation, you'll pay higher insurance on a new car, and sales tax, and probably interest on a new loan.

On the other hand, if you're driving a 2008 Dodge Durango, which gets only 13 mpg, you could be spending almost $3,500 a year in gas. And the car probably isn't paid off yet. In this case, downsizing to a smaller RAV4 could save you almost $250 over the next three years. Even if you sprang for a V6 in the RAV4, your fuel costs would go down by $1,400 a year, and you'd come out almost $1,000 ahead overall after three years.

So downsizing usually won't save you money. But if you've kept your SUV as long as you ever planned to anyway, you may already have budgeted for those extra costs. And if saving fuel to benefit the environment, world, or the country is a motivation, downsizing will definitely help. The RAV4 would save almost 280 gallons of fuel a year, and the Matrix's 1.8-liter engine would burn 386 gallons less than the Explorer.

The chart below illustrates these examples, showing the comparison between the older vehicles and the costs for years 2011 through 2014.

	Original purchase price	CR overall mpg	Annual fuel cost	Total owner costs through 2010	Total owner costs 2011-2014
2006 Ford Explorer XLT (V6)	$35,520	15	$2,960	$55,049	$17,982
2008 Dodge Durango SLT (V8)	$32,405	13	$3,415	$38,138	$24,558
2011 Toyota RAV4 Base (4-cyl.)	$25,405	23	$1,930	0	$24,326
2011 Toyota Matrix 1.8	$19,290	29	$1,531	0	$21,116

As the numbers show, downsizing is more a decision of conscience than frugality. The best move for most car owners would be to hold on to the current ride for its natural life, including years without payments, then be strategically choose the replacement. Another benefit for holding off on downsizing is that efficiency, safety, and convenience features continue to improve with each model year, and there are more, space-efficient new models coming down the road.