The government has announced moves to help cut car prices after an official report revealed that Britons pay around £1,100 more for an average car than elsewhere in Europe.
Trade and Industry Secretary Stephen Byers said the Competition Commission report confirmed what many people thought - that Britons were paying "over the odds" for new cars.
The report found that prices in the UK have been between 10-12 per cent higher than in other European countries, even though two thirds of cars sold in the UK are imported - and therefore should benefit from the high value of the pound.
Private car buyers were paying about 10 per cent, or £1,100, too much for the average car.
Mr Byers said he was introducing measures to bring greater competition to new car sales which should mean lower prices and increased sales.
"These measures should restore confidence and bring certainty to the car market," he said.
But the Society of Motor Manufacturers and Traders (SMMT) said there was "little scope" for significant price reductions.
The difference in car prices was because Britain remained a "high currency market", not a high price market, the SMMT said.
The Consumers' Association, which has championed the campaign against "rip-off Britain", said it was delighted that the Government was taking action.
Mr Byers said he was taking "immediate steps" to make the market more competitive, such as insisting that dealers are offered the same bulk discounts as fleet customers, which he said should make the market function more fairly and put downward pressure on prices.
The minister is now requiring dealers to offer private purchasers similar discounts to those offered to fleet buyers.
Typically, consumer discounts average around 7 per cent, while fleet discounts can be as high as 37 per cent.
The commission's report found that a complex monopoly situation operated in favour of 17 suppliers, each with 1 per cent or more of the total supply of new cars in the UK.
These suppliers together accounted for 94 per cent of UK new car registrations in 1999.
The Department of Trade and Industry said current practices "mislead" consumers about new car prices.
The new measures will ensure that dealers are free to advertise cars at the price they were prepared to sell, without fear of a penalty from suppliers.
Interested parties will have until May 19 to comment on the planned changes, which are expected to come into effect in two months' time.
Mr Byers said: "The findings of the Competition Commission report cannot be ignored. They represent a clear and unambiguous call for change which requires a positive response.
"For many private buyers, a car is the second most expensive purchase of their lives. This report confirms what many people have thought was the case - that in Britain we are paying over the odds for new cars. The reason for this is that the market is not operating as competitively as it should."
The SMMT said car prices had fallen by more than 5 per cent in the last two years, but the weak euro and varying tax regimes across the EU were responsible for variations between Britain and other countries.
The Retail Motor Industry Federation said the report should end months of speculation and confusion in the minds of private buyers.
"Stephen Byers has clearly recognised the inordinate power of suppliers over retailers and this will go a long way to giving car dealers the power to deliver euro and dot-com prices at their dealerships," said chief executive David Evans.
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