Carmakers feel the heat as prices drop

Car prices are continuing to tumble, according to pricing monitors, as low consumer demand forces carmakers to discount key models. Their action comes in spite of SMMT assertions that the market remains stable.

The latest Alliance & Leicester Car Price Index, which received widespread media coverage, revealed that new car prices in January fell 3.3% on the corresponding month last year.

City car prices endured the largest nosedive, plummeting 9.2%, with MPVs - the fastest growing sector of the market - dropping 4.4%.

Steve Fowler, editor of What Car?, which helps to compile the index, said potential buyers would defer purchases until trade and industry secretary Stephen Byers published what is expected to be a damning conclusion to the Competition Commission pricing inquiry.

“Car buyers are holding on to their cash, waiting for prices to drop further and not even the lure of the new W-registration is likely to attract them into showrooms,” he said.

However, Cap Motor Research, whose own car price index showed that list prices in March had fallen for the eight consecutive month, blasted the consumer lobby for taking a “simplistic” view. It believed buyers were missing out on some cheap deals.

Daren Wiseman, senior editor, said: “The list price is irrelevant in the UK because almost nobody pays it. The list price tends to be a starting point for negotiation and, by waiting for it to come down, consumers are missing out on some tremendous deals.

Ford has cut the price of its entry-level Mondeo. The £13,495 Verona supersedes the £16,000 1.8LX. Equipment levels between the two are almost identical, including aircon and metallic paint, though the Verona lacks some features, like ABS and heated mirrors. Also new is the £17,000 Mondeo Zetec S, based on the £15,400 Zetec but with the ST-24 body-styling features.

Seat will launch its new Leon on April 10 with prices starting at £10,995 for the 1.4S 5dr. All S specification models come with power steering, central locking, four airbags, ABS, electric front windows. The £11,995 1.6S and £13,195 TDiS also receive aircon. Prices are significantly lower than the Toledo saloon from which the Leon is derived – the 1.6S is £2,300 less. Top model is the 180bhp 20VT Cupra at £17,995 with a cheaper, more basic 20VT model for £15,995.

Saab has slashed the price of its diesel 9-3 models by £1,650 so they are now £800 less than the equivalent petrol models. Prices start at £16,495 for the base 2.2 TiD.

Mitsubishi has launched 'Style' packs for lower-specified versions of the Carisma and Galant, priced £995 and £695. Both include alloys, spoiler, stainless exhaust trim and, on the Carisma, side skirt extensions.

Volvo is to introduce a 4x4 version of the V70 estate this summer. The XC (cross-country) model has raised suspension and the option of three transmissions – manual, five-speed auto or manually controllable auto. The 200bhp XC will retail at less than £28,000 - a premium of about £2,000 over the standard model.