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Tuesday, 4 September, 2001, 22:57 GMT 23:57 UK
Car prices rise for one in four models
Traffic jam
The report says car prices have risen in many cases
Car prices on average fell only fractionally last year, and in some cases cars actually increased in price, despite a government clampdown on pricing.

Under the government's "New car supply order" issued in September 2000, manufacturers were ordered to cut the price of cars by about 10%.

In hindsight the order had protected manufacturers at the expense of dealers

Steve Evans of CarPriceCheck

But according to a survey by CarPriceCheck, a company which collates car price information, manufacturers have only cut prices by 2.7% on average.

In some cases - 22% of the models surveyed - the list price has increased in value over the year.

The report offers one of the clearest indications of car price movements, because it surveyed 50 like-for-like models from 28 leading manufactures between the period August 2000 and August 2001.

In the past, manufacturers have responded to criticism about car price rises by arguing that specifications had changed on their most popular models - and it was impossible to make comparisons.

The Department of Trade and Industry (DTI) said that it would be studying the report's findings.

Margins squeezed

The report paints a bleaker picture based on the actual price paid by consumers at dealers - the forecourt transaction price.

While list prices have been reduced, the fall was not matched proportionally with the transaction price.

The cost of buying a car at a dealer has on average only fallen by 2.08% in the year up to 31 August 2001, with prices rising in 24% of the models surveyed.

The "New Car Supply Order" permitted dealers to buy cars at discount bulk-buy "fleet" rates, but for many dealers this has been simply unaffordable.

Steve Evans of said that dealers were suffering immense economic pressure: "In hindsight the order had protected manufacturers at the expense of dealers".

Government action?

In September last year, Stephen Byers , formerly secretary of state at the Department of Trade and Industry, ordered manufacturers to cut prices by 10%.

Byers' action followed a damming Competition Commission report into the car industry.

A spokesman at the DTI said that statistical evidence over the last twelve months demonstrated that new car prices had fallen by about 7%.

She said: "The government recognises that prices still need to fall further to make the new cars market more competitive to deliver value for consumers.

"We are working to make sure this happens."

Dealers fight back

Several dealers complained to the Office of Fair Trading (OFT) in March that manufactures were breaching the order.

The OFT is still investigating the claims, and it is uncertain when an announcement will be made.

If its preliminary investigations conclude that manufacturers have breached the order, it could pursue the matter in the courts.

If found to be in contempt of the order, manufacturers could face hefty fines.

See also:

27 Jul 01 | Business
Car prices 'set to rise'
23 Jul 01 | Business
EU: Cars cost most in the UK
23 Jul 01 | Business
Q&A: 'Rip-off' car prices
03 Sep 01 | Business
NHS drives up cost of car insurance
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