All the signs are pointing to Australia’s car fleet continuing to get smaller. Not in terms of number of vehicles, but in terms of the size of the vehicles.

Data released recently by research firm Canstar Blue shows that people who have bought new cars in the past few years are already looking to downsize to a smaller car to save on running costs.

The survey of over 1700 people found around 45% considering trading in their car for a more fuel efficient one, with this sentiment strongest in Victoria and amongst Gen Y. Reasons cited were increases in running costs and people looking to trim expenses, where car expenses are often a big part of total household expenses.

Meanwhile recent drops in interest rates have lifted demand for new cars, with car sales going over 50,000 in September – the highest monthly figure for nearly two years.

The high Australian dollar is bringing the cost of imported cars down, at the same time a flood of new smaller car models has come to the Australian market. In almost all cases the new cars have a much higher specification than the models they replace and are less expensive, putting more stress on the second hand car market.

Toyota and Nissan have new models in the sub-$20,000 bracket (including a new Corolla), Mercedes is launching an all-new C-Class hatch priced to compete against VW and top end Japanese cars. And the latest Golf unveiled at the Paris Motor Show earlier this month will feature ‘cylinder deactivation’ to reduce fuel consumption, something previously only featured on higher price models.

And when the new Golf arrives in Australia early next year, VW has promised pricing will remain very close to the current model. Skoda are also introducing a new model to the Australian market, the Rapid, a small sedan which looks like a hatchback. It will offer many of the same features on higher priced models, but of course at a budget price ticket. If you’re looking for a small car, there’s never been a better time to buy.

Aussie Car Loans can organise car finance for purchases of all car types and have access to a range of options for car auction loans as well. For some general advice on buying a car, visit our car buying tips page.