When you have a certain budget in mind, is it better to buy the biggest standard car you can afford, or should you stick to a smaller, cheaper one and add options?

And since larger cars tend to come with more equipment as standard, would the smaller car actually be any better value?

These are valid questions when you're looking for a new car. Cars have grown considerably over the years, significantly moving the goalposts of what class a given size of car falls into.

Take the family hatchback Peugeot 306 from 1993-2001 and the supermini Fiat Punto Evo from today; both 4.03m long.

So on that basis, considering that people managed just fine driving smaller cars for the same purposes in the not-too-distant past, we can still choose to do it if we want to, rather than conforming to expectations or guidelines.

The average family size is smaller now than it was, too. Here are a couple of comparisons. Volkswagen make three saloons: the Jetta, the Passat and the Phaeton. The Jetta and Passat are both viable options for families, and the Passat and Phaeton are both possible company car choices – although probably not on the same list.

The Jetta, in mid-range SE trim, costs £18,515 with a modest-power but smooth and reliable turbo-charged 1.4-litre petrol engine.

You can get the same engine in the Passat SE for £20,315.

That's a bigger, better-equipped car for £1,800 more. Go for the Jetta and you could spend that money on a sat-nav, DAB radio, parking sensors and 17in alloy wheels.

But the Passat already has the DAB radio and 17in wheels, so while you're still gaining the satellite navigation system and the parking sensors, both incredibly useful features, the Passat has loads of practical gizmos that the Jetta lacks.

However, such important features swing it for the Jetta, making it more appealing in real-world use.

Add metallic paint and one or two other commonly expected options to the Passat, and that could allow even more spending freedom on the Jetta options list for the same price.

Now compare the Passat with the Phaeton. You can spec a Passat, in range-topping Sport guise, up to a point where it matches and even exceeds the standard Phaeton's kit quota, with things such as a heated windscreen, keyless entry and a rear-view camera, but it's still around £7,000 cheaper to buy.

You're not getting the build quality of the Phaeton, though, or the use of the special "Phaeton/Touareg owner-only" lounges at Volkswagen dealerships.

And several bits of technology fall behind. The V6 diesel in the Phaeton isn't available in the Passat, and the Phaeton is four-wheel-drive, with four-zone climate control and Google Maps within its sat-nav for no extra charge, if you ask for it.

Still, £7,000 is a large gap, and if your desire is for a large, comfortable car with all the kit, a good image and all-round appeal, the Passat would be the better everyday prospect. Again, the smaller car with the options wins.

But depreciation is an issue. Certain optional extras count for very little when it comes to selling a car on, while others are expected.

It all depends on what kind of car it is as to what kit second-hand buyers will expect on it, and speccing a cheaper car up to the nines is a sure-fire way to feel an extra-large hit from depreciation.

The conclusion of all this postulating is that you should always do your sums to work out the long-term financial realities, but if you choose the options carefully and are willing to make do without a few gadgets that you don't really need, smaller cars with options can make better everyday machines than their factory-standard big brothers.