Motorists take cheer from cheaper cars

New car prices have fallen from an average £14,397 to just over £13,000 in the last five years, while the Retail Prices Index has risen by 12.8 per cent. This is the main finding from the final Alliance & Leicester Car Price Index.

New car prices have fallen from an average £14,397 to just over £13,000 in the last five years, while the Retail Prices Index has risen by 12.8 per cent. This is the main finding from the final Alliance & Leicester Car Price Index.

The survey found that nearly new cars have fallen even further in the period, by an average of a fifth, while used cars have fallen by a quarter. Nearly-new are a year old, and used are at least three years old.

The cheaper the car, the faster their price has fallen. City cars, the lowest price category, have become nearly a fifth cheaper, but luxury cars are only 5.4 per cent down over the five years.

Andy Bayes, head of personal loans at Alliance & Leicester, said: "The last five years we have been sponsoring the survey have seen the car-buying consumer's position strengthen. Demand for new cars has remained very strong, with record volumes of cars sold year on year. Despite this, prices have fallen, squeezed by increased competition from cheap imports."

The market was opened up by the lifting of the Voluntary Export Restrictions on cars after a media campaign claiming that car buyers in this country were suffering from "rip-off" Britain. This was fuelled by the strength of sterling, which made international comparisons of prices in Britain appear higher than those in other countries.

The proportion of total weekly household expenditure used to buy vehicles has risen from 4.7 per cent in 1994-5 to 6.6 per cent in 2002-3, because more households have more than one vehicle.

Alliance & Leicester is ending its sponsorship of the Car Price Index, which is calculated by the Centre for Economics and Business Research. The centre's director, Douglas McWilliams, said: "By looking at the prices consumers actually pay, rather than list prices, we have gained a valuable insight into the reality of the UK motor industry."

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