Retail prices paid by consumers for new cars dropped 2.2% year-on-year in November, according to Alliance & Leicester figures. This compares to a 1.5% drop the previous month.

MPV prices plummeted 11.2%, while small cars dropped by 7.9%. Family car and compact executive prices, though, each increased by 1.8%.

A&L's Andy Bayes said: “Consumer confidence in the new car market remains high and prices remain cheaper than a year ago. There is a marked divergence between different categories and great bargains to be had – particularly on MPVs and small cars.”

Steve Fowler, editor of What Car?, pointed to rising prices of some models and issued a warning to dealers.

“Buyers will expect to get something extra if they have to pay more, and dealers will still have to be ready to discount to win buyers' business in 2002,” he said.

Meanwhile nearly new values have levelled out after several strong months. The A&L index showed a 0.9% increase in November, compared to a 9.8% rise in October. Luxury cars enjoyed the sharpest rise, at 9.4%, while MPV values slumped 3.2%.

* Bargain prices are set to boost the grey import market, according to Cap Grey Book. Editor Robert Hester said economic problems in the Far East would mean falling values, giving specialist importers more buyer power.