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Monday, 23 July, 2001, 09:11 GMT 10:11 UK
Q&A: 'Rip-off' car prices

Car manufacturers again stand accused of charging UK customers "rip-off" prices.

BBC News Online explains why.

Why are car prices higher in the UK than in mainland Europe?

Consumer groups say most of the reasons given for higher prices are "excuses" used by manufacturers and traders to keep prices higher than they need to be.

But there are some areas where the motor industry doesn't have so much control - the strength of the pound makes a difference to manufacturing and export/import costs, as do taxation levels across Europe.

If, for example, the pound is strong, the export market suffers, but the import market thrives, cutting the cost of imported cars.

But some claim this still doesn't account for the huge discrepancy between UK prices and those abroad.

The latest research by the European Commission reportedly suggests new cars in the UK are up to 60% more expensive than those elsewhere.

The UK was the most expensive for 52 out of the 81 best-selling models surveyed.

This was, however, a modest improvement on last year's EU report which had UK prices topping the table for 70 of the 73 best-selling models.

How do manufacturers explain the high cost of cars in the UK?

Car makers say there are lots of reasons why prices are higher.

They say consumers buying a car from a UK dealer are paying for personal expertise and advice that's recognised by the manufacturers - manufacturers only sell through recognised dealers - as well as the cost of making right-hand drive vehicles.

They also say that, while prices may be higher, consumers get more additional features as standard, compared with continental buyers, and they also get quality after-sales service.

If all that is true, how come the car firms have been cutting some prices in the UK?

Car manufacturers have been cutting prices because they're frightened of losing sales.

Sales have picked up in the past few months after prices began to fall.

Previously, they had been slow, partly because consumers were holding off buying new cars, hoping the government would do more to force manufacturers to slash prices.

What effect will buying on the internet have on car prices in the UK?

Another reason why the price of new cars in the UK has been falling is the fear of fast growth in buying vehicles direct from Europe via the internet.

Buying on the internet has proved popular among consumers because it's convenient and easy to compare prices.

Some dealers have offered consumers the chance to visit their showroom, see cars for themselves and take them for a test drive, before logging onto their internet site and ordering via the web.

What can the government do to force prices down?

In September 2000, the then trade and industry secretary Stephen Byers introduced legislation to give ordinary car buyers access to the same discounts as fleet customers.

This cut car prices by an average of 1,100.

Further progress on lowering prices largely depends on the intervention of the European Commission, which is next year due to review the car industry's block exemption from competition law.

What this exemption means is that manufacturers have the right to dictate how, where and at what price their cars are sold - and this is why prices can be kept high.

If the commission allows the block exemption to continue this would protect the monopoly of dealer networks.

Consumer groups are likely to press the government to act unilaterally.

If the law is changed and manufacturers are denied this right, it should bring cars sold in the UK into line with those on offer in Europe.

See also:

23 Jul 01 | Business
Inflated prices for British cars
30 May 01 | Business
Cheaper cars drive higher sales
08 Apr 01 | Business
UK car sales set for 'record year'
25 May 01 | Business
What drives car insurance higher?
23 Feb 01 | Business
Buying cars on the web
18 May 01 | Facts
A fair deal for consumers?
25 Feb 01 | Business
Your say: buying cars online
01 Sep 00 | Business
Car price law in force
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