New car prices are on the rise again, and the greatest increases are to be found in the compact family hatchback sector (Vauxhall Astra, Ford Focus, Renault Mégane).

According to the December New Car Market Trends report from Glass's, the price of the average car in this sector has gone up by 5.9%, year-on-year, almost double the total for the market as a whole.

While this trend is partly influenced by the discontinuation of lower-spec variants of the outgoing Mk4 Volkswagen Golf, this sector is still seeing above average list price rises that are well in excess of inflation.

The report indicates that the price of the average* new cars in the UK has gone up 3.1% over the past 12 months, equivalent to a £402 rise.

However, the 5.9% rise for new compact family hatchback prices is equivalent to an increase of £715.

Over the last three years, prices of all new cars have increased by 5.7%, but Glass's says that the rate of increase has accelerated steadily during 2004.

"The higher inflationary pressures have been apparent for some months, and are largely the result of escalating fuel and energy prices, together with the rising cost of steel," says Adrian Rushmore, managing edtor at Glass's.

"We expect to see the full affect of these additional costs filter into the market during the first quarter of 2005 by way of further price increases. Later in the year we are likely to see price stability as the new car market struggles to maintain the levels of registrations of the last two years, and as competition hots up."

Glass's says that 2005 will also see a marked increase in the range of new cars available (up 55% on the number of model launches in 2004), and much of this growth will be in niche sectors, such as SUVs, MPVs and convertibles.

"With market-wide sales slowing over the next 12 months, this increase in consumer choice is likely to result in additional price pressure being brought to bear on more conventional sectors, such as compact family hatchbacks," says Rushmore.

Other sector-by-sector price changes

Last month larger people carriers/MPVs saw above average year-on-year rises, but in December it is clear that prices are back to a more sustainable level - up by 2.6%. Prices for new compact MPVs also rose by 2.6%, year-on-year, compared to a 2.3% increase for superminis and a 2% rise for larger family saloons and hatchbacks (eg Vauxhall Vectra, Toyota Avensis).

There have been price falls in two of the key sectors assessed by Glass's. Prices for Sports Utility Vehicles (SUV) are down 0.5% year-on-year, while large executive models (such as Audi A6 and BMW 5 Series) have seen price falls of 0.1 per cent.

* The list price of the 'average' new car referred to in the monthly Glass's New Car Market Trends report is based on analysis of over 1,000 models across key UK vehicle segments. To ensure the results are representative of true market trends, the data is weighted by sales volumes.