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Tuesday, September 7, 1999 Published at 13:43 GMT 14:43 UK

Business: Your Money

Car prices driven down

Car dealers are making more special offers

By BBC Industry Correspondent Rory Cellan-Jones

British motorists are all too aware of one fact of life - new cars cost more in the UK than just about anywhere else in Europe.

But now there are clear signs that the manufacturers are having to respond to pressure from both customers and the regulators to cut prices.

Motor trade analysts say prices for new and used cars are on their way down.

Ford, Volvo and Porsche are amongst the car makers now offering special deals on new cars.

Free extras

Volvo is giving dealers a thousand pound premium on cars registered by the end of September and dealers are passing that on to customers.

Porsche is cutting £4000 pounds off the price of the 911 model.

Other makers are offering added extras - air-conditioning, sunroofs, free insurance - while holding prices steady.

A new index of car prices compiled by CAP Motor Research shows new car prices are down by 0.4% compared with last September.

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With motorists now realising they can get new cars with added extras, the price of second hand vehicles is falling quickly.

The CAP index shows average prices down 4.2% on the year.

Intervention warning

Experts at Glass's Guide , the motor trade "bible", believe there is a fundamental change going on in the car market with prices for used vehicles on their way down for the last eighteen months.

Adrian Rushmore, Glass's Car Editor, says the price-cutting will continue.

"The competitive pressures in the industry are getting more and more intense, and the manufacturers are now aware they have to compete on price," he said.

Some of the pressure on the industry is coming from the Competition Commission_s inquiry into new car prices - but some in the motor trade are warning that direct government intervention could destabilise the whole market.

Mel Morris who runs the Concept Car supermarkets chain says the current gradual fall in prices is welcome.

Car price revolution

But he fears a sudden collapse in prices, sparked by government intervention.

Mr Morris said: "You've got to remember most people buying a new car are also part-exchanging an old one.

"If new prices fall 20% overnight, the value of their car will also fall by the same amount - and that could have a big effect on the confidence of buyers."

The revolution in British car prices is underway and there are bound to be casualties.

But consumer groups say it is high time motorists got a better deal.

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