The latest PricewaterhouseCoopers and eurocarprice.com New Car Price Index shows that the average retail price of a car in the UK rose by 3.4% in the year to September compared to 5.4% in the 12 months to June.
Chris Hibbs, UK automotive leader for PricewaterhouseCoopers, says: "The 12 month results show a balance between supply and demand for new vehicles and vehicle affordability for consumers. The result in the UK and in the pan European marketplace as well seems to be price stabilisation although pre-tax prices in the UK increased by 2.6% in the twelve months to September 2004 compared to 1.7% across the whole of Western Europe.
"Despite the UK car market now slowing, a fourth consecutive record sales year remains a distinct possibility."
Total new car sales in the UK from January to the end of August this year were 1% up on the same period last year, although sales in August 2004 have dipped by 4.9% compared to August 2003.
Robin Goodyer, operations director of eurocarprice.com, says: "UK car buyers are facing strong increases in prices of executive cars due to sustained demand for new prestige cars. Conversely, prices of sports utility vehicles and small people carriers are rising less steeply despite equally buoyant demand. This is due to the large number of new models available.
"One reason why buyers of small MPVs and other small cars are benefiting from competitive prices is that more manufacturers are using 'shared platforms', where several different types of car are built using a common base. This keeps down the costs of developing and launching new models, meaning more choice for the consumer. The small MPV sector is an excellent example of this."
Average retail car prices in the UK last month were 1% higher than the average for western Europe and 2% higher than the average for the euro currency zone.
In Europe as a whole, the strongest movement in retail car prices was in Denmark where prices rose by 4.9% during the 12 months to September. The weakest price movement was in Hungary where retail prices decreased by 4%.
The average pre-tax price of new cars in the UK (converted to euros) rose 2.6% in the 12 months to September. Pre-tax prices in the UK are 6% higher than the average for Western Europe and 7% higher than the average for the euro currency zone. Pre-tax car prices in the whole of Western Europe rose by 1.7% in the year to September.
The traditionally strongest segments in the UK car market; lower medium, upper medium and small car, have all declined significantly year on year. So far in 2004, UK small car sales are down by 2.3%, lower medium sales have dropped by 1.9% and upper medium by 0.7%.