Time to downsize?

We all want to save money these days, what with the cost of living continuing to climb and ever-increasing fuel prices.

Considering that giving up your car isn't really an option for most people, many are starting to consider downsizing because it's one way that you could potentially save a lot of money. It doesn't, however, mean you'll have to put up with a cheap banger and no creature comforts.

We've come up with some examples to demonstrate how much you could save. They're based on the driver averaging 12,000 miles a year, with petrol costing £1.28 a litre and diesel £1.33.

If you're thinking about buying something more economical, or smaller, then it's important to remember to take into account depreciation as well as the other running costs when you're making your choice. All depreciation figures are based on future calculated residual values as they currently stand.

Downsizing from a Range Rover....to a Mercedes-Benz E-Class Estate:

Many people buy 4x4s not for their capability off-road but for the amount of space inside. There are, however, cheaper ways to get such space. By changing to an E-Class estate you not only get a car that's a year younger, but maintain that prestige image with that three-pointed star. Both are equally well equipped too, so you won't find yourself wanting.

To start with you'd stand to net over £20,000 if you sold your Range Rover and bought an E-Class or similar. You might even be able to simply trade in the Range Rover at a dealer if you wanted to simply the process, especially if it's a clean example with a good specification - but you'd probably get around £2,000-£3,000 less than a private sale.

Over the course of the year you'd also save £5,966 in depreciation and running costs, meaning you'd be saving approximately £16 a day, or almost £500 a month.

	2009/59 Range Rover Vogue 3.6 TDV8	2010/10 Mercedes-Benz E350 CDI BlueEFFICIENCY
Mileage:	10,000 miles	7,000 miles
Value:	£56,330	£35,700
Economy:	25mpg	39mpg
Tax:	£435	£235
Fuel costs:	£2,898 a year	£1,858 a year
Running costs:	£736	£702
Depreciation:	£13,238	£8,546
Yearly costs:	£17,307	£11,341

Downsizing from a BMW 5-Series....to a Volkswagen Golf:

You might think to going from a 5-Series to a Golf seems like an odd step but they both have premium German badges, seat four adults in comfort and are well built.

Although it's over a year younger, the Golf doesn't come with as much equipment as the 5-Series as standard, so keep an eye out for one that's got cruise control, iPod connectivity and rear parking sensors. Both, however, have air-con, CD players and electric windows.

With its economical and clean diesel engine the Golf's also significantly better on fuel and much cheaper to tax. This means that by downsizing you would get £2,050 cash back after selling your BMW and buying the Golf, and would save at least £1,009 a year on running it and in depreciation - meaning almost £2.80 extra in your pocket each day.

	2006/56 BMW 525i SE Manual	2008/57 VW Golf 1.9 Bluemotion S TDI
Mileage:	40,000 miles	20,000 miles
Value:	£10,815	£8,765
Economy:	30mpg	62mpg
Tax:	£245	£30
Fuel costs:	£2,324 a year	£1,167 a year
Running costs:	£737	£828
Depreciation:	£1,028	£1,300
Yearly costs:	£4,334	£3,325

Downsizing from a Ford Galaxy....to a Citroen C3 Picasso:

When people need to cart a few kids around they usually jump straight to the obvious candidates for cars like the Vauxhall Zafira and Ford Galaxy but in many cases they could get as much use out of something that's equally flexible but much smaller.

The C3 Picasso is an efficient, easy-to-drive and practical people carrier that offers considerably higher economy than even the most frugal versions of the Galaxy, while benefiting from much cheaper tax due to lower emissions. By changing from a Galaxy to a C3 Picasso you also get a car that's younger with a lower mileage.

Because the C3 loses less money each year in depreciation and is cheaper to run, you could save £3,620 each year meaning an extra tenner in your bank account each day. You'd also get get around three grand cash back straight away after selling the Galaxy.

	2008/08 Ford Galaxy 2.3 petrol automatic	2009/59 Citroen C3 Picasso 1.6 HDI VTR+
Mileage:	26,500 miles	9,600 miles
Value:	£13,085	£9,860
Economy:	29mpg	62mpg
Tax:	£425	£90
Fuel costs:	£2,405 a year	£1,236 a year
Running costs:	£637	£230
Depreciation:	£3,537	£1,738
Yearly costs:	£7,004	£3,384

Parker's Top Tip:

Find out how your car is worth by getting a valuation.