Car buyers are 'overcharged by £1,000'

The motor industry set itself on a collision course with the Government yesterday by ruling out big reductions in car prices even though an official report concluded that private buyers are being overcharged by an average of £1,100.

The motor industry set itself on a collision course with the Government yesterday by ruling out big reductions in car prices even though an official report concluded that private buyers are being overcharged by an average of £1,100.

The Competition Commission blamed the overpricing on the stranglehold the big manufacturers have over their dealer networks, and called for sweeping changes in the way cars are sold and distributed.

According to its report, UK car prices are 10-12 per cent higher than in Germany, Italy and France, costing UK buyers an extra £1bn a year. Private buyers were worst-off, receiving a fraction of the discount offered to fleet customers.

The report comes at a critical time for the UK motor industry, with BMW pulling out of Rover, Ford likely to end car production at Dagenham and manufacturers complaining about damage done by the strength of the pound.

The Secretary of State for Trade and Industry, Stephen Byers, announced immediate measures to help bring down car prices and restore consumer confidence. Manufacturers will be forced to offer dealers the same discounts as fleet buyers.

The Commission said discounts for private buyers were typically 8 per cent compared with up to 35 per cent for fleets. Suppliers will be prevented from penalising dealers who advertise cars at less than the recommended retail price.

Sheila McKechnie, director of the Consumers' Association, said she was delighted the Government had rejected the "lame excuses" for overcharging given by the manufacturers.

But the Society of Motor Manufacturers and Traders, representing the big 17 car firms, said the differences between UK and European prices were due to exchange rates and varying tax regimes.