Car prices look set to fall

Prices of new cars are set to tumble

The average price of a new car is set to fall by more than £1,000 under a government scheme unveiled on Tuesday.

Trade and Industry Secretary Stephen Byers announced the move to bring in extra competition in the supply and sale of new cars.

I believe it is ... important for the industry to bring prices down quickly and give consumers the confidence to buy

Stephen Byers

It outlaws the practice of discriminating against private buyers, giving them the same benefits as those enjoyed by those buying fleets of cars.

The new measures, which should come into force in September, will also prevent suppliers from pressurising dealers into fixing higher prices.

The government's move follows a report by the Competition Commission which found that UK motorists were paying up to 12% more for a new car than their European counterparts.

"We could not ignore this clear and unequivocal finding and have taken ... action which will ensure that consumers get a fair deal," Mr Byers said.

The legal order comes into force on 1 September.

He admitted that a month was a tough timetable for the industry.

Caution urged

"But while I appreciate that the car manufacturers need time to prepare so they can comply with the order, I believe it is more important for the industry to bring prices down quickly and give consumers the confidence to buy," he said.

The high prices prompted the Consumers' Association to launch a campaign to highlight what it called the "Great British car rip-off" in April last year.

New car prices have been falling for some time now and there are spectacular deals on offer in franchised dealerships throughout the country

Christopher MacGowan, SMMT chief exec

It wanted to shame the car industry into bringing down prices by showing how UK buyers are being overcharged compared to motorists on the continent.

Car manufacturers said they welcomed the new order as a way of ending the uncertainty over prices which has put many consumers off buying cars.

The Society of Motor Manufacturers and Traders (SMMT) says that car prices have already fallen by 6.5% in the past two years in the UK.

SMMT chief executive Christopher Macgowan said: "It is clear that common sense has prevailed at the DTI.

"The publication of today's Order ends months of uncertainty in the market, and means the motor industry can now work quickly to ensure that this new legislation is implemented and that consumers can buy new cars with confidence."

"New car prices have been falling for some time now and there are spectacular deals on offer in franchised dealerships throughout the country."

But some analysts have warned that the UK car industry could be damaged if prices fall too much because lower profits will hit investment plans.