Car price law in force

Car prices are expected to fall by at least £1,000

British car buyers could see the price of new vehicles fall by £1,000 or more, as a new law comes into force on Friday designed to increase competition in the industry.

Car firms will now have to offer their dealers the same discounts as fleet buyers.

The launch of the X-reg should have been used by car makers as a clean break from their past abuses - instead we have a confusing mixed bag of reductions, cashbacks and spec changes

Consumer Association

The move follows an investigation by the Competition Commission, which showed that British buyers were paying on average 12% more than other Europeans for their cars.

The new legislation should bring prices in the UK into line with those on the continent.

Ford and Vauxhall sit tight

Companies such as Mercedes, Mitsubishi, BMW and Land Rover have already reduced the recommended retail price of their cars.

Mercedes announced just over a week ago that it will cut its prices by up to 20% and match UK list prices with those on mainland Europe.

However, the two market leaders, Ford and General Motor's Vauxhall, have yet to move.

The Society of Motor Manufacturers and Traders (SMMT) says its members have already complied with the new legislation.

But many companies are offering special deals and cash back offers.

Phil Evans of the Consumer Association said: "The launch of the X-reg should have been used by car makers as a clean break from their past abuses. Instead we have a confusing mixed bag of reductions, cashbacks and spec changes. which consumer groups have dismissed as marketing gimmicks."

The government wants car makers to cut the price of cars by at least another 6%.

Fines

It has given them six months to prove they are offering real discounts to consumers.

If they fail to do so they will face unlimited fines.

The Competition Commission investigation carried out earlier this year found that private buyers were paying about £1,100 too much for the average car.

It is estimated that the overall cost to car buyers in the UK amounts to £1bn a year.

A recent survey conducted by the British Independent Motor Trade Association revealed that next year one in six new cars is likely to be bought outside the UK.

Inflated prices

The association said the figures show that consumers were not willing to pay inflated prices for new cars in the UK.

The law comes into force in time for consumers buying new X-registration models which go on sale on Friday.

Industry experts expect sales to be close to 400,000 in September as motorists snap up the new number plate.

The new registration triggers fewer sales since it switched from once to twice a year, but September's sales could still be the biggest of the year.

The SMMT has predicted that total sales will reach 2.2 million for this year.

The industry hopes that consumer confidence in the cost of new cars is returning following months of confusion over prices.