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Tuesday, December 8, 1998 Published at 08:52 GMT


Business: The Economy

UK car prices 'too high'

Prices in the UK are a third more expensive

A study by a group of Members of Parliament released later on Tuesday is likely to find that UK consumers pay unacceptably high prices for cars.


John Moylan: retailers blame manufacturers for high prices
The report is expected to say that customers are getting a raw deal due to dominant manufacturers, poor quality garage servicing and the "feeble" existing powers of competition regulators.

A House of Commons Trade and Industry Committee is likely to call for a large shake up of the way cars are sold, with dealers or manufacturers found guilty of anti-competitive practices liable to fines.

MP's also want the "block exemption", which allows dealers to operate outside EU competition laws, to be scrapped.


[ image: Leading makes can cost UK consumers a pretty penny]
Leading makes can cost UK consumers a pretty penny
At the moment cars are sold through authorised dealers, with each dealer having a monopoly over a set geographical area. That restricts competition and could contribute to higher prices.

Rip off?

Leading makes of cars are on average up to 40% more expensive in the UK than in continental Europe according to a recent European Union (EU) report.

The largest discrepancy was found with the Ford Mondeo, which was 58.5% more expensive in the UK than in Spain.

In fact 61 of the 72 best-selling cars in the EU cost more in the UK.

Dealers dilemma

However car dealers lay the blame on the manufacturers.

They claim that prices are set by manufacturers, and that their own margins are extremely small.

Christopher MacGowan of the retail motor industry federation said: "Prices that are set by manufacturers do have undue influence over dealers. Margins are incredibly tight. We would like to see greater flexibility."

Unfair burden

Companies buying a fleet of cars tend to get a better deal from manufacturers.

However that means that private buyers are left to pick up the bill, effectively subsidising big companies by paying higher prices.

To make matters worse obstacles are being put in the way of UK purchasers buying their cars abroad and saving themselves thousands of pounds.

Manufacturers claim that varying tax levels across the EU have forced them to charge different prices.

Under close scrutiny

The report could influence the Office of Fair Trading, which is currently investigating possible monopolistic behaviour in the car market.

The UK Government has also requested that the European Commission investigate price disparities between European countries on a range of products and services, including cars.



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