How higher gas prices impact that appeal of car downsizing

In our recent examination of whether it makes sense for consumers to downsize to a smaller vehicle to combat high gas prices, we looked at real-world numbers to illustrate the decisions consumers are faced with and reveal their impact. Unfortunately, gasoline prices have continued to climb. So, we decided to revisit the analysis and explore the impact of today's prices and potential further increases.

We originally calculated gas prices at the latest available national average, which just a couple weeks ago was $3.70 a gallon for regular and $4.00 for diesel. (We didn't include any cars that require premium gas in our analysis.) We re-ran our calculations assuming gas prices of $4, $4.50, and $5 a gallon to see how the downsizing paid off. Regular gas already costs more than $4 a gallon in many parts of the country, and sadly those are scenarios worth considering.

We returned to our original example of the 2006 Ford Explorer, which got 15 mpg in our tests, and assumed a logical trade to a Toyota RAV4 to save fuel without giving up too much in the way of utility.

At $4 a gallon, the Explorer is costing the average driver about $3,200 a year in gas. A four-cylinder Toyota RAV4 with its optional third-row seat, would save you $1,000 a year in fuel compared with the Explorer. But counting depreciation on the new car, over the next three years, the RAV4 would still cost you almost an extra $5,000 over the next three years, $23,655, versus $18,702 for hanging onto your old Explorer.

Another option, if you really want to save money, might be trading in the Explorer for a used RAV4. Finding a used 2009 RAV4, with 28,000 miles for $22,025 would bring that total three-year cost to $17,500, or about $1,000 less than keeping your Explorer. With a used car, the desired, instant savings is attainable.

At higher gas prices, the picture doesn't change much. Naturally, gas savings go up, but the cost of replacing the car doesn't disappear. Simply put, as gas prices rise, the payoff time decreases, but the same core downsizing principles still apply, even at $5 a gallon.

What does make a difference is if you would consider buying a smaller car and/or a used car. If you'd consider going to an even smaller car, such as a Toyota Matrix that gets 29 mpg, you could break even after three years at $5 a gallon. Or if you'd consider buying a used RAV4, say a 2008 RAV4 with 36,000 "gently used" miles, you could save almost $2,000 over three years, even if gas cost "only" $4 a gallon. At $5 per gallon, you could save $2,800 over three years.

So if gas prices are driving you mad, trying to cut back by downsizing your car is no easy fix. If that's what you're considering, it pays to check Consumer Reports owner cost ratings and do some research to be sure trading your car won't cost you more in the long run. Ultimately, car ownership is a long-term investment, and there are no instant savings without significant sacrifice.

Related:
Lessons in car downsizing
Downsizing: Choosing a used car to save gas and money
Downsizing: Right-sizing the sedan fuel bill is no easy challenge
Downsizing your SUV for better mpg—does it make cents?
How to know when it's time to downsize your car
Downsizing: The 12 most useful cars per mpg
Survey shows car downsizing is in, but not for everyone

—Eric Evarts