Lessons in car downsizing

With fill-ups approaching $80 a tankful for big vehicles in many places, a lot of large sedan, SUV, and truck owners are thinking about cutting their losses and buying something smaller to ease the recurring pain at the pump. After crunching the numbers on various real-world scenarios in previous blog posts, we've reached a few general conclusions:

Whether or not you should downsize to save money depends largely on how you think about the investment you've already made in your old ride and how long-term is your financial vision. Downsizing now could reduce your out-of-pocket costs in the short term, but over the long haul, you could lose more on the new car's depreciation than you're saving in gas.

The longer you own a car, the more years you have to amortize the initial purchase, and the cheaper it will be to own. So if your old car is still running well, in the long run you're usually better off hanging onto the old beast even if it does guzzle fuel.

• In the current market, prices on small, efficient models is up due to demand and in some cases supply constraints from Japan. At the same time, trade-in values for large gas-guzzlers is down. If you can wait out the current gas prices and other market factors, you will likely get a better deal overall.

• If your current ride is a few years old, it may make sense long term to cut your depreciation losses and replace it with a thriftier model. We found in our analysis that even a five-year-old car with a loan that's paid off could be costing you more in fuel and other operating costs than you'd spend on some smaller brand-new cars over the next three years. But short-term savings do require real compromises.

• The "dollars and sense" equation is driven by the new car you choose. Based on Consumer Reports surveys, most people don't want to give up much utility in their quest to save fuel. So we've come up with a list of cars that offer the most overall utility at various levels per mpg. Fuel economy alone won't do the trick. Several vehicles that offer both good utility and good mileage, such as the Chevrolet Tahoe Hybrid, Toyota Highlander Hybrid, and Ford Escape Hybrid are so expensive to buy that their gas savings can't make up the difference. In the end, some compromise is necessary to net significant savings. That can mean lowering fuel economy expectations, buying a much smaller car, or even shopping used cars, rather than new ones.

• Beyond gasoline prices, there are other reasons to leave your old car behind. Many newer cars have additional safety equipment, such as electronic stability control, rollover protection systems, and curtain air bags that older models don't come with. Further, newer models tend to perform better in crash tests.

• If you're willing to buy a used car, you can avoid the steep depreciation costs of a new car and save even more money, or have a choice of more up-level vehicles for the price.

For the downsizing series posted to the Cars blog, our analysis factored all ownership factors, including depreciation, loan interest, sales tax, insurance, fuel, and maintenance and repair costs. Counting all those things, you can definitely lower your annual bills over several years if you can find a car that's significantly more fuel efficient, not too expensive, and still meets your needs.

But if you must save money today, downsizing could help. But it pays to look at the long-term financial picture. Buying another new car within a few short years and taking a loss on its depreciation too, could usurp any savings. Unless you choose carefully, the cost to buy a newer model (measured in thousands of dollars) can overwhelm the savings at the pump (counted in the hundreds of dollars). Be sure to read: "How to get the most mpg now."

Related:
How higher gas prices impact that appeal of car downsizing
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

—Eric Evarts