Study predicts cheaper UK cars

Car prices are set to drop even more in the future

UK car prices are falling quickly and are expected to drop even further, according to a new study.

Both new and used cars were cheaper in July than they were 12 months ago, the Alliance & Leicester car price index has revealed.

Used car prices fell by the greatest amount, 18.8%, over the year while nearly new cars - one-year-old - dropped in value by 17% and new cars by 4.9%.

Buyers should continue to haggle to get the best deal

Tim Pile, Alliance & Leicester's business strategy director

Despite the drop, UK consumers are still paying the highest prices in Europe for new cars and sales are still sluggish, just 1.1% up this year.

The biggest savings on new cars were on multi-purpose" vehicles such as Land Rovers and Vauxhall Fronteras, which fell 15.4% on average.

But some types of car - such as new superminis and luxury cars like Jaguars and Mercedes - became slightly more expensive.

Doug McWilliams, of the Centre for Economic and Business Research, said consumers are still waiting for lower prices, which he believes will continue to fall.

"We are now seeing falling prices for many consumer goods such as household appliances, audio-visual equipment and clothes.

Strong pound a factor

"This reflects the ongoing strength of the pound, which is starting to feed through to the consumer in lower prices.

"The fall in car prices that the Alliance & Leicester car prices indices are now measuring is part of this trend.

"But we have a lot further to go and I would expect to see new car prices fall faster over the next year than in the past 12 months."

Tim Pile, Alliance & Leicester's business strategy director, said: "It's good news for customers to see prices falling faster than ever before in our car price index but buyers should continue to haggle to get the best deal.

"We are hopeful of reporting even lower prices after September's X plate registrations."