X marks next step in car wars

Yesterday's car: Friday sees the launch of X-registered cars

The desire to buy a car on the first day of the new registration plate traditionally made August the busiest month of the year for new car sales in the UK.

Such was the demand that the government introduced twice-yearly registration changes - in March and September - in an effort to level out sales across the year.

Friday will be the first day people can get their hands on X-registration cars. It is also the day that government regulations aimed at bringing down car prices come into force.

I don't think there is much scope for further dramatic price cuts

SMMT spokeswoman

Dealers may hope that these two factors will encourage consumers back into car showrooms - but consumer groups say car prices have a lot further to fall.

Driving a hard bargain

Since the last new plates were issued in March, the car industry has been shaken at its core by a controversy over the cost of prices in the UK compared to the rest of Europe.

A Competition Commission report in April found car prices were about 10 to 12% higher in the UK than in other European Union countries.

In response to this report, Trade and Industry Secretary Stephen Byers announced plans to ensure that car dealers can buy new cars at the same price as commercial buyers.

Our concern is that a lot of them are marketing gimmicks and not real price cuts

Consumers' Association spokeswoman

Suppliers must offer dealers the same volume discounts as fleet buyers, who can enjoy discounts of about 35%. They also cannot stop supplying cars to dealers who refuse to stick to list prices when advertising new cars.

Manufacturers have a three month grace period to implement the rules, which come into force on Friday.

So far, the negative publicity over high car prices has encouraged potential car buyers to wait.

New car sales fell 6.4% in July to 156,588, partly in anticipation of the new X registrations and partly in the hope of future price cuts.

Consumer Association advice

Choose your model

Look at its immediate competitors

Research the price at your local dealer

Compare this price to the European import option

Check whether your choice of car is available as a pre-registered or 'nearly new' car

Reach for the calculator!

Several car manufacturers have already cut their prices.

New car prices fell nearly 5% in the year to July, according to a survey by UK bank Alliance & Leicester published on Wednesday.

But opinion is mixed as to whether car prices will really fall any further.

"We are hopeful of reporting even lower prices after September's 'X' plate registrations," Tim Pile, Alliance & Leicester's business strategy director, said.

Doug Williams of the Centre for Economic and Business Research said: "We have a lot further to go and I would expect to see new car prices fall faster over the next year than in the past 12 months."

X-reg hopes

Hopes are high for sales of X-registered cars.

"The UK has a quirky little love of having the latest registration," a spokeswoman at the Society of Motor Manufacturers and Traders ( SMMT) said.

This desire to sport the latest plate will hopefully lead to between 370,000 and 400,000 cars being sold in September, she added. This is roughly in line with the 401,996 cars sold in March when the W plate was introduced.

Confidence has returned to the marketplace, she said, adding that prices have stabilised.

"I don't think there is much scope for further dramatic price cuts... . People now have more confidence in the marketplace and feel they can go into a dealership and get a good deal," an SMMT spokeswoman said.

But consumer groups warn that potential buyers should still check out how much it costs to import a car before writing a cheque in the UK.

"Our concern is that a lot of them are marketing gimmicks and not real price cuts. Our advice is to do your homework," a Consumer's Association (CA) spokeswoman said.

The consumer group also believes car prices should fall further, pointing out that manufacturers have a three month grace period to introduce the new law.

Cheaper cars cost more

In practice, consumers may find that even if prices fall, they are handing over the same amount of cash for a new car.

The reason? They are getting less for the old car they are trading in.

Prices for one-year old cars fell 17% while used cars fell 18.8%, the same Alliance and Leicester survey found.

Falling sales of new cars have meant that many manufacturers have classified these cars as nearly new or pre-registered. This has increased supply in the second-hand car market, bringing down prices, the CA said.

But the CA spokeswoman is confident price cuts in the new car market will outstrip those in the already heavily competitive used-car market.