Speaking today at the opening of the Paris motor show Mr Reilly also said he was satisfied with the number of cars Vauxhall had sold via its own internet retailing venture launched last year.
He told Automotive Management: "Branson is to sell used cars because he is not selling any new ones. The Virgin Cars operation, like a number of other similar new entrants, is trying to convince consumers that because there's a difference in list prices between the UK and Europe that you can enjoy savings through the internet.
"But consumers are finding this not to be the case and in fact in their rapid disillusionment they return to the dealerships and find the transaction price and the satisfaction they can get from trading in their existing car provides the best deal."
Virgin Cars' CEO Ian Lancaster announced at this week's Automotive Management autumn conference, 'Motor retailing 2005' that the company will start selling used cars next month.
Mr Reilly also defended the sales record of Vauxhall's retailing website, Vauxhall Online.
"We've sold something like 1,200 vehicles since its November launch and while that seems fairly small compared to the 700,000 vehicles which we sell a year, it's more than any other organisation has sold via the web.
"We are leading the way in our use of the internet. But to the customer - because our internet programme incorporates our dealers - it still feels like a traditional sale once they have made their buying choice on the website." Customers order via the site and the car is delivered to their door by a dealer in about seven days. The main attraction on the General Motors' stand at the show was the new Corsa, which is launched throughout Europe today.