Carmakers are likely to maintain their discounts and incentives for new car buyers in the UK in 2005, according to a New Car Price index from PricewaterhouseCoopers and europrice.com.

The index shows the average list price of a new car in Britain rose by 2.6% last year, compared to 4.7% in 2003.

However, a much larger fall in registrations is forecast for 2005.

PricewaterhouseCoopers’ UK automotive leader Chris Hibbs says: “The lost revenue from new car sales in the UK – if registrations fall as far as predicted – would be more than £1 billion.

With a large number of new models due out in 2005 and continuing intense competition for market share, we expect the trend for discounts and incentives for car buyers to continue and for list prices to rise slowly, if at all, in real terms.”

Recent Government figures show that households spent 1% more on buying used cars in 2003 than they did in 2000. In contrast, they spent 43% more on new cars although the number of new cars registered went up by 26% over the same period.

"Although this difference implies that the level of price discounting has not damaged car industry sales revenues, the majority of cars were manufactured outside the UK, so the manufacturers' return was affected by exchange rates.

The significant weakening of the Pound against the euro since 2000 has reduced carmakers' revenues despite the buoyant UK sales picture.”

The New Car Price Index also reports that pre-tax car prices in the UK rose by 2% last year, compared to 3.1% in 2003. The rate of pre-tax price increases fell from 1.7% to 1.3% during 2004.

The weakening of the Pound against the euro has produced some compensation for UK car buyers. In June 2004, UK new car prices were 6% higher than the average for countries in the euro zone. In December, UK prices were only 1% above the same average despite a slight strengthening of the Pound.