Blind bends in car pricing law won't cut real cost

The Government has promised us cheaper car prices. But will we notice the difference?

Despite Stephen Byers, the Secretary of State for Trade and Industry, promising that new legislation will cut car prices from the start of next month, the reality is that we may not actually end up paying any less.

Despite Stephen Byers, the Secretary of State for Trade and Industry, promising that new legislation will cut car prices from the start of next month, the reality is that we may not actually end up paying any less.

Under the new laws, manufacturers will no longer be able to set dealers' prices, so private buyers will benefit from the same savings enjoyed by companies buying fleet vehicles.

This sounds like excellent news. Yet, while it cannot be described as bad news, on closer inspection savings may not be much greater than those we are already enjoying. The latest car price index from Abbey National found that prices are already down by about 10 per cent on last year.

"There are some fantastic deals to be had. Incentives were introduced to make prices more attractive," says Andy Pringle, deputy editor of What Car? "If list prices come down, dealers could well withdraw the offers of free insurance, free servicing and good finance deals that are currently available."

What Car? recently published a survey looking at car prices. It found that we actually pay substantially less than the list price. Mystery shoppers visited 250 showrooms and got discounts on 49 out of 50 different models. For example, a Ford Focus 1.6 Zetec, listed at £13,500 was discounted to £11,995. Once the new laws come into effect the new list prices will probably be about the same as the discounted prices you can get now. So we are unlikely to be paying any less.

If you want further savings, buying a car off the internet may be the answer. Car-Prices- .com can import a Ford Focus 1.6 LX for £8,592, against a UK list price of £14,000 - a saving of 63 per cent.

Despite the savings, many are put off buying a car over the internet largely because of fears about what to do should something go wrong. Increasingly, online companies are taking this into account and offering a comprehensive service. Virgincars.com, which launched in May, will deliver the car to your door, and the price includes a three-year extended warranty. Virgin will come and collect the car when it needs servicing and take it to the nearest dealer.

"We are trying to make buying and owning a car as hassle- free as possible by providing a complete service," says a spokesman for Virgin.

However, while you do make savings, Virgin aims to provide good service rather than cheap cars, so the savings aren't the best. Their price for a Ford Focus 1.6 Ghia is £10,908.

There are certain things to consider when buying a car over the internet. What Car?'s Andy Pringle advises going through the contract with a fine toothcomb, particularly if the car is being imported. Check if it is UK-sourced. If not, the second-hand value could be affected. Delivery times also tend to be longer if you order via the net, so be prepared to wait.

Even if you don't buy over the internet it is well worth getting some quotes. It will put you in a much stronger position when it comes to negotiating a price with a dealer. Even if they won't match the price, the chances are that you will get some discount.

At the end of the day, when buying a new car many drivers will feel more reassured going to a UK dealer, and for those people there are some good deals around if they are prepared to negotiate.

Others will be quite happy to buy a car over the internet, in which case it is well worth considering the aftercare service that's offered as this could prove very valuable should something go wrong.