2017 is the Year to Buy This Type of Car — Hint: It’s Not an SUV

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2017 is the Year to Buy This Type of Car — Hint: It’s Not an SUV
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Think small.

Think used.

Those are good rules of thumb to remember if you’re buying a car this year.

Automotive experts agree that in 2017, the best used cars for your wallet will be small.

Why is that, exactly? It’s because market forces are working together to make it so. Supply, meet Demand.

Here’s Where the Deals Are

Why a used car? Because the second you drive a new car off the lot, it starts losing value quickly. In contrast, you’ll be able to resell a used car for a price that’s closer to what you paid for it.

Also, used cars are more reliable than ever.

Leasing spiked in popularity earlier in the decade, reaching an all-time peak in 2014. Millions of cars that were leased for two or three years at that time are now hitting the used-car market. You should look for a used car in good condition with relatively low mileage at a reasonable price. Consumer Reports recommends buying a car that’s 2 or 3 years old.

Why a small car? Because that’s where the best deals are.

In general, the prices of used cars have been rising noticeably in recent years because so many buyers have access to easy credit. However, low gas prices are leading more of those buyers to purchase used SUVs, trucks or large cars — not smaller cars.

For that reason, prices for used compact and subcompact cars have been steadily falling, according to the car shopping site Edmunds.

Large used vehicles are getting more expensive. Prices for used luxury SUVs went up 12.5% in one year, according to Edmunds’ most recent Used Vehicle Market Report. Prices for large traditional SUVs are up 12.3%; compact trucks are up 10.2%; and large cars are up 8.5%.

The price of used midsize cars has remained steady.

But that’s not the case for smaller cars.

“The best values for used car shoppers can be found in the subcompact category, where prices are down an average of 6.3% year over year,” Edmunds reports. “Compact cars (down 2% year over year) also offer great value for used car shoppers.”

You can save money by not following the crowd.

“If you’re a used car shopper in the market for a small vehicle, this is a great time to buy,” said Ivan Drury, a senior analyst for Edmunds. “Prices are down for these vehicles because there is so much more demand for used trucks and SUVs.”

It’s less clear what all of this means if you’re trying to trade in your current car. But it’s an important point to consider, because a record number of car buyers these days are upside-down on their car loans, with 32% of people who offer their vehicles for trade-in owing more on them than they’re worth.

Ultimately, your current car’s mileage and condition will affect its trade-in value more than anything else. For an estimate of your car’s trade-in value, check here or here or here.

Compacts and Subcompacts: What’s the Difference?

That’s all well and good, we hear you saying. But what exactly is a compact car? What’s a subcompact?

Helpfully, there are strict, exact standards for these terms. It has to do with the amount of room each vehicle has in its passenger area and trunk.

A subcompact car has 85 to 99 cubic feet of passenger and cargo space. A compact car has 100 to 109 cubic feet. A midsize car has 110 to 119 cubic feet. A large car has 120 cubic feet or more.

Popular compact cars: Ford Focus, Honda Civic, Toyota Corolla, Chevrolet Cruze, Mazda3, Volkswagen Jetta, Toyota Prius c, Kia Rio, Hyundai Accent, Nissan Versa and Volkswagen Golf.

Popular subcompact cars: Ford Fiesta, Mazda2, Chevy Spark.

Cars that are even smaller than subcompacts — for example, a Smart Fourtwo — are called “minicompacts” or “microcars.”

Knowledge is Power

There’s obviously way more to buying a used car than simply picking its size. Here at The Penny Hoarder, we’ve rounded up some helpful tips here, here and here.

The bottom line: Knowledge is power. Information is your friend.

Fortunately, millennials are all in on that concept. Another recent Edmunds study found that tech-savvy millennials are educated car buyers due to their heavy use of smartphones to do research while shopping.

Websites like Kelley Blue Book, J.D. Power and U.S. News & World Report can help you find the best used cars for you by helping you narrow down the vehicle makes and models you want to consider.

Or you could shell out $6.95 a month for a subscription to Consumer Reports so you can read its rigorous used-car ratings.

Once you’ve narrowed down your search to a particular car, you can get a free CARFAX report on that vehicle’s history.

Good luck with the car shopping. Remember: Think small.

Your Turn: What’s the best or worst used car you’ve ever had?

Mike Brassfield (mike@thepennyhoarder.com), a senior writer at The Penny Hoarder, has bought five cars in his life. None of them were new.