Dealers are concerned that falling prices, triggered by the Competition Commission inquiry last year, are encouraging potential buyers to shun used cars in favour of new.

Sir Peter Vardy, chairman of Reg Vardy group, said: “New car sales were strong in September and we have a lot of orders carried over into October because of a shortfall in supply.

“New car prices have come down, which is affecting the used car market. A lot of people who would've bought used are now finding they can afford a new car.”

Cap Motor Research reports that used car sales were already sliding in August, with the market down 5.9% on August 2000. It has forced total sales year-to-date down 0.9% on last year.

Tony Styles, senior editor of Cap Black Book, said: “Rumours are rife that stock is backing up and many fields are full of cars that are being kept out of the market. This can undermine confidence.”

But he predicted that the market would hold up due to the “more controlled” supply of nearly new stock and “the lack of retailable three-to-four year-old stock”.

Cap expects used car transactions to reach around 7.1m, ahead of 2000.

DVLA figures showed sales to June reached 3.76m, up 4.3% on 2000, putting the industry on target to exceed last year's 6.76m market – despite the August blip.

Manheim reports that the September used market began strongly, with good quality, low mileage cars maintaining high residuals and, in some cases, an increase in price.

Dealers were bidding for cars in the 10,000-80,000-mile range just days after the new registration plate was available, which suggested few part exchanges had been taken against new deals.

However, Manheim warned that fleet, lease and contract hire cars returning to the market would cause a flood of mid-condition cars, resulting in a residuals fall.

  • The RAC Report on Motoring 2001 reveals that 64% of business drivers would choose a used car if they opted out of a company car.