Car dealers must give all buyers 'fleet discount'

Government announces moves to force down the cost of vehicles

The cost of a new car should be slashed by an average £1,100 from 1 September under a Government initiative aimed at shedding the "rip-off Britain" tag.

The cost of a new car should be slashed by an average £1,100 from 1 September under a Government initiative aimed at shedding the "rip-off Britain" tag.

British motorists are expected to save an estimated £1bn a year as a result of the decision taken by Stephen Byers, the Secretary of State for Trade and Industry.

The move follows a Competition Commission report which calculated that Britons were paying around 10 per cent more for their vehicles than consumers in continental Europe.

A legal order issued yesterday means that from next month private buyers must be given the same discounts on cars as companies buying fleets of vehicles. The rule will come into force on the same day as the next number plate change.

Manufacturers will also no longer be able to set dealers' prices, giving potential buyers the chance to shop around and force prices down even further.

Mr Byers said the decision would bring greater competition to the motor industry and end months of uncertainty in which drivers have stayed away from forecourts in anticipation of price reductions.

The announcement provoked a row been manufacturers and dealers. The car- maker's association, the Society of Motor Manufacturers and Traders, warned the public not to expect a sudden substantial fall in prices because the cost of new vehicles had already been falling for several months.

Rob Holloway at the society said the Competition Commission report was compiled last May and research by the Alliance & Leicester had shown the prices had dropped by 6.5 per cent in the 12 months to June.

Commenting on the society's assertion, a spokesman for the Retail Motor Industry Federation, which represents dealers, said: "They would say that, wouldn't they? They're trying to talk down the possibility of big price reductions.

"But they are shooting themselves in the foot. They are encouraging people to go abroad to buy cars or get on to the internet."

He said many manufacturers had been trying to "muddy the waters" by offering new finance agreements, extras and even "cash-back" deals.

Despite the manufacturers' reservations, he expected the order would deliver lower prices quickly and restore consumer confidence. "At last the consumer can visit their car dealer with total confidence, assured that they will get the best deal around when purchasing their new car," he said.

Mr Byers said he had set the industry a "demanding" timetable in response to the report.

He said: "We could not ignore this clear and unequivocal finding and have taken quick and decisive action which will ensure that consumers get a fair deal when they buy a new car."

He said the way to restore consumer confidence was for suppliers and dealers to deliver competitive prices.

Campaign groups including the Consumers' Association have called for a substantial cut in car prices, pointing to the availability of cheaper vehicles on mainland Europe and via the internet. The association welcomed yesterday's announcement and said it expected to see list prices coming down.

A spokesman for the group, which launched a car import scheme earlier this year, said: "That is the only way confidence will return to the market."