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Price claims threaten car crisis

Cap Network has warned of a possible return to the damaging car market crisis of 2000, with consumers expecting massive price cuts, following the publication of the EU draft Block Exemption proposals.

Mistaken expectations of £3,000 across-the-board cuts could now prompt car-buyers to play the same waiting game which cost UK motorists billions last time round. The EU draft proposals are aimed at removing the motor industry's 'block exemption' from normal competition rules -for example by enabling any retailer, such as supermarkets, to sell cars.

In reality, CAP's economics team does not expect final Block Exemption rule changes to have a significant impact on residual values in the medium term.

Martin Ward, CAP Network national research manager, said: “Headlines mistakenly suggesting new car prices are about the fall again are a threat to the stability of the whole market.

“Although manufacturers were forced to cut list prices last time by customers simply staying away from showrooms until they did, I genuinely believe the manufacturers don't have the same room for manoeuvre today.

“But the danger is that the public may not understand that and instead be tempted to stay away from the showroom until new cuts are announced.

“Back in 2000 this behaviour caused all cars to plummet in value, and therefore exposed every car owner in the country to hugely accelerated depreciation costing the country billions.

“Cars are better value today than they have ever been, especially measured against typical household incomes. Perhaps the biggest challenge facing the carmakers is convincing consumers of that fact.”

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