What to consider when downsizing your car

An elderly couple inspecting a  car at a dealership

Nicola Dowse

Posted April 28, 2023

There are benefits to downsizing your car, but it pays to thoroughly consider your personal circumstances before making the swap.

Just like with homes, many people decide to downsize their cars as their needs change over time.

Car running costs as well as lifestyle changes such as switching careers or moving residences are also reasons that households might consider downsizing one or more vehicles. For example, that large SUV might have been perfect when living regionally, but a move to a metropolitan area could make a hatchback more economical to run, and easier to drive and park.

Swapping to a smaller vehicle can have a host of benefits, with light or small cars often more fuel efficient without compromising on comfort or features. They can also be cheaper to maintain and service. According to RACV’s latest Car Running Costs Survey, the average monthly running costs for light cars, small cars and small SUVs is less than $1,100, while the average monthly running costs for medium cars, medium SUVs and large SUVs is over $1,300.

Victoria’s cheapest cars to own vary greatly by size

Vehicle Category

Vehicle Category

Average Monthly Cost

Average Annual Cost

Light Cars



Small Cars



Medium cars



People movers



Electric cars



Small SUVs



Medium SUVs



Large SUVs



All-terrain vehicle (4x4)



Source: RACV Car Running Costs Survey 2022.

Things to consider when downsizing your car

The principles of downsizing your vehicle

To reap the benefits of downsizing, consider some or all of the following criteria:

  • The vehicle is physically smaller. This is particularly important if you envision driving predominantly in congested urban environments.  

  • The vehicle is cheaper to purchase. If you plan to resell your current vehicle, ideally you want the downsized vehicle to cost less than the proceeds of that sale.

  • The vehicle is more fuel efficient. Generally, the smaller the car, the more fuel efficient it is, largely because the engine does not have to work as hard to move a smaller, lighter car which typically carries less people and goods 

  • The vehicle should be cheaper to maintain. The size of the vehicle can impact its affordability when it comes to maintenance and servicing.



A bright blue toyota corolla parked by a lake on an overcast day

Downsizing your car doesn't mean having to sacrifice key features and comfort. Image: Supplied.

Why you’re downsizing and what you’ll be using your car for? 

Downsizing your vehicle doesn’t mean you have to commit to the smallest model on the market. 

There are small cars that are roomier than you might think – the Toyota Corolla was one of the most affordable small cars to own and operate in 2022, with the Kia Cerato S and Hyundai i30 also featuring competitive operating costs and without sacrificing too much cabin space. Bear in mind that if boot space is important to you, sedans tend to have more than hatchbacks.  

Likewise, if you want to downsize your car but still expect to regularly be driving long distances or in challenging terrain (such as up steep hills or gravel roads), look for a smaller vehicle that has the engine performance and ground clearance required for such use.  

Buying a new or used car?

You might think that downsizing to a second-hand car will save you even more money. However, the current competitive used-car market at the moment means the savings may be minimal, and you risk the vehicle costing more to maintain due to wear and tear (without the assurance of a manufacturer’s warranty as well). If your heart is set on second-hand, consider having the vehicle inspected prior to purchase to help provide peace of mind. 

One of the benefits of downsizing to a smaller vehicle means that your budget goes a lot further than with a larger car. New cars also tend to cost less to run and service – a big incentive when downsizing – and you can tailor the vehicle to exactly what your household needs. However, depending on what you want you may need to wait longer for a new vehicle than for used.



A blue GWM Ora driving along a country road

The GWM Ora is one of the few electric hatchbacks available in Australia. Image: Supplied 

Electric or internal combustion engine (ICE)?

EVs can sometimes cost less to run, and often include high-tech features to boot. There are also rebates available for EVs, plus finance possible through green loans.

If you are set on a used car, you’re going to have more options if looking for an ICE or hybrid vehicle, with the pre-owned EV market tight and largely dominated by Tesla vehicles such as the Model 3 sedan. There isn’t a huge range of light EV hatchbacks available in Australia either - however Australia’s current cheapest brand new EV, the GWM Ora, is a hatchback.

What will you do with your existing car?

Whether it’s a trusty sedan, spacious SUV, or maybe even the family people mover, you’ve probably got lots of fond memories of the car you’re downsizing from. Thinking about your lifestyle now and in the foreseeable future can help you determine whether you sell or keep your existing vehicle. 

For example, if you still see yourself doing lots of towing or camping, keeping your family SUV might be a good idea for those occasions, with a smaller vehicle for everyday use so long as you’ve got the finances to cover running costs for both vehicles.

If you’re thinking about selling your car online, you’ll need to take plenty of photos, work on your sales pitch and consider a vehicle inspection report, which can make your car stand out and be seen as a safe and more reliable option than other vehicles. 

Thousands of Victorians get their used car loan through RACV
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R.A.C.V. Finance Limited ABN 82 004 292 291 Australian Credit Licence No. 391488. RACV Finance is subject to RACV lending criteria. Conditions, fees and charges apply.