Are Small Cars Cheaper? (Full Explanation & Facts!)

When we refer to “small cars,” we are typically talking about cars that the EPA defines as having just 100-109 cubic feet of passenger and cargo interior volume.

They are built with 161 to 167 inches in length.

In general, smaller cars also have smaller engines that are typically no bigger than 2.0L displacement.

This article answers the question “Are Small Cars Cheaper?”…

Table of Contents

Are Small Cars Cheaper?

It does appear that in both the senses of purchasing and running a vehicle, smaller cars are indeed cheaper than larger ones. There are some notable exceptions of some smaller vehicles that cost more than certain sedan cars, but by large, small cars are cheaper in every way you would care to think.

Buying Price

It is very rare, if ever possible, that you would come across cars like sedans and SUVs that were cheaper to buy new than a smaller car.

There are certain models that exist such as the Hyundai Veloster N, which stand out as performance-oriented small cars.

These do come with larger price tags north of $30,000 but stand as exceptions to the rule rather than as examples of it.

The vast majority of small cars are priced below $25,000.

Beyond the sticker price, those who purchase smaller cars on finance such as taking an auto loan or signing a lease agreement will generally enjoy more favorable terms when it comes to monthly payments.

The difference between a higher-level small car and a higher-level mid-size or larger sedan car can be as much as $150-200 per month in cost for financing.

Insurance

The average cost of insurance across all cars in the US is $1,674 for cars.

That’s for full and comprehensive coverage, and not just basic liability insurance as some people get.

Let’s say you have a choice between a small car with a 1.6L engine, 2 doors, and the horsepower rating well under 150hp.

Such a car would be much cheaper than the average to insure compared with a 3.0L turbocharged V6 engine boasting 220hp.

Insurance is all about risk, and therefore the monetary value of every part of the car becomes a factor. Small cars are generally worth less than larger ones.

They have smaller engines and fewer horsepower, therefore can’t be driven as recklessly as easily, thus are at lower risk.

There are many notable exceptions to this rule, however. Take the Mini Cooper, for instance, many of which are loaded with powerful BMW engines.

Young male drivers are often paying more to insure their Mini than their parents are to insure their full-size Toyota Camry.

Road Tax

The United States doesn’t have a federal “road tax” in the same sense that many European countries do, but what we do have in general is a state-by-state system of registration, either annual or bi-annual depending on both the state and car owner preference.

While systems vary between states, most states have either a fixed rate or one based on weight such as Colorado and Hawaii.

Where there is a fixed rate, small cars end up costing the same to register as large ones, but there are inevitably other fees to pay in many states.

In Arizona and California, for example, there is an additional property tax levied against cars that are measured according to the current value.

Since smaller cars are worth less than larger ones, this tax will be cheaper if you have a smaller car.

In many cases, then, when it comes to registration and tax in the US, a smaller car is indeed cheaper.

The same result seems to occur in other countries around the world, too.

Maintenance & Repairs

Smaller cars don’t automatically have cheaper components and maintenance costs, especially if the smaller vehicle comes from a luxury brand like Mercedes-Benz or BMW.

The fact is that components from luxury brands cost more, as does the labor of OEM (Original Equipment Manufacturer) dealership technicians.

A well-maintained Toyota Camry will be cheaper to look after than a smaller Mercedes-Benz A-Class, for example.

Repair costs as a part of overall maintenance generally refer to those more unexpected costs for repairs that are needed.

These are also not influenced as greatly by size as they are by brand.

Certain car brands like Toyota, Honda, and Nissan are much more reliable than Ford or Chevrolet.

Even a larger vehicle from the former three brands could be cheaper to maintain and repair overall than a smaller car from the latter two brands.

Accessories

Car accessories are similarly affected more by brand rather than brand.

The huge range of available accessories, with many crossing boundaries of compatibility between smaller and larger cars, is limited only by what OEMs imagine and discover that people want.

Overall, you might suppose that accessories for larger cars are more likely to cost more since they are larger in size, but brand name plays a much bigger part.

Audi and Mercedes-Benz accessories are, for instance, generally more expensive than accessories for Dacia or Ford cars.

Tires

Tires on smaller cars naturally cost less because they are smaller and require less raw material to produce.

The average small car comes with wheels of just 14-16 inches, for instance, whereas larger cars like SUVs and full-size sedans ride on wheels of 17-21 inches.

The additional rubber and wheel rim materials cost more. The gap in tires can be closed somewhat depending on the brand of tires that you purchase.

Larger generic tires on a sedan car could cost overall more than a set of Bridgestone or Pirelli tires would on a smaller performance car.

Once again, however, these would be exceptions to the rule rather than part of the rule. Bigger cars require bigger tires for more traction, and that generally means a greater cost.

In the realm of tires, a smaller car is definitely cheaper.

Gas Consumption

People might look to smaller and larger cars and automatically consider the smaller cars to be cheaper.

They generally get better gas mileage ratings, don’t they? That’s true, but they also have smaller gas tanks than larger cars.

Does the larger tank in a full-size sedan make up for the difference in gas mileage?

If we look first at gas mileage, then smaller cars generally do better. The only way that larger cars do better than smaller ones is when they are hybrid versions.

Hybrid sedans can get up to 50mpg or more, especially Japanese-brand models. Let’s do a closer comparison.

A Volkswagen Golf can cover a total range of 475 miles on one tank of gas if we take combined fuel consumption of 36mpg as a standard.

Its tank capacity is 13.2 gallons. It consumes approximately 3.1 gallons of gas per 100 miles.

A larger sedan like the Audi A6 (also VW-owned) has a 19.3-gallon tank, much larger than that of the VW Golf.

Its best consumption rate is 26mpg combined, giving it an estimated range of up to 501 miles when using its combined mpg rating.

It consumes therefore 3.8 gallons of gas per 100 miles.

US gas prices are currently $3.10 per gallon, meaning that a full tank in the VW Golf costs about $41, whereas in the Audi it costs $60.

Looking at these two cars, there’s no escaping the fact that ultimately a VW Golf is only estimated at $1,450 to fuel annually, whereas an Audi A6 is estimated at $2,350.

Depreciation/Resale Value

Depreciation is often based more on brand than it is on car size.

BMW, Ford, Mercedes-Benz, Volvo, and Nissan are cars that apparently depreciate the fastest in the United States according to the most reliable sources.

These are all vehicles of different sizes and styles. Volvo doesn’t make compact cars, for example, where Ford does, and yet both are bracketed as the most heavily depreciating.

Overall, you can expect a better final deal when trying to re-sell a larger sedan or SUV than you would a small car.

This is mainly due to market forces placing greater value on these vehicles as family cars. Smaller cars tend to have less demand in this lucrative market sector.

The greater utility, power, and comfort of larger cars tend to help them retain value. People often seek smaller cars looking for a bargain, which helps drive down costs.

Overall Conclusion

What we see here in this table below is the overall picture that proves that in many ways small cars are cheaper to purchase and run.

First of all, they come with a much lower sticker price to start with. This also creates the right conditions for better car finance deals for yourself, reducing monthly payments further.

Insurance is also broadly speaking going to be cheaper for a smaller car, not just because of its size but because its lower net value makes it less of a risk, and it is also less desirable as a target for thieves.

Insurance is still a mixed bag though as one man’s large sedan with 5 years of never claiming against it could still be cheaper than a new VW Golf for a driver with no record.

Consumables like tires and gas cost more the bigger the car you get, and mostly because bigger cars require you to fill up more frequently and in greater amounts.

Smaller and mid-size cars have the advantage of cheaper overall gas.

The fact is, however, that maintenance is maintenance and the gaps between different sized cars aren’t as big as the gap between different brands.

When it comes to depreciation, there is a lot of very close competition when you look at models broadly.

Depreciation remains at around 20 percent in the first year and then keeps fading at about 10 percent per year until you get a final number of about half the car’s original value after 5 years.

The Mid-Size SUV depreciates the fastest, however, mostly because of the fact that that’s also the largest and fast-replacing market with models being produced all the time to replace older ones.

Average Yearly Cost	Small Car (USD)	Mid-Size (USD)	Sedan (USD)	SUV (USD)
Buying Price	21,700	31,000	36,500	66,800
Insurance	1,050	1,190	1,300	1,560
Road Tax	8 – 225	8 – 225	8 – 225	8 – 225
Maintenance & Repairs	490	526	675	806
Tires	110	150	150	175
Gas Consumption	1,200	1,500	1,800	2,200
Depreciation	52% after 5 years	44% after 5 years	55% after 5 years	52% after 5 years

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