THE Competition Commission has cast a shadow over the new and used car industry which may only be lifted by radical action from manufacturers, Glass's Guide has warned.

Debate over new car prices is still keeping new and used car buyers away from the showrooms in anticipation of car prices falling further following publication of the findings of the Competition Commission's New Cars Inquiry.

Figures released last month showed that residual values had tumbled 7.7% year-on-year, the worst performance in the second-hand market for many years. The discouraging signs from the commission have added to a traditional downturn at this time of year, according to Glass's Guide chief car editor Adrian Rushmore.

To create more interest, their only option may be to sideline retailers' recommended prices, no matter what the Government decides, and concentrate on transaction prices in all marketing to customers.

Rushmore said: 'Customers were of the opinion that lower new car prices should translate into lower used car prices and so the best course of action was to do nothing. The stalemate in the new car market can only be broken if manufacturers take the initiative on new car prices. This does not mean necessarily reducing list prices, but taking the necessary action to advertise transaction prices more widely.'

Writing in the June editorial of Glass's Guide, Rushmore added: 'Furthermore, we would expect manufacturers to strive for lower transaction prices by stripping out some or all of the consumer offers.'

CAP Black Book in its June editorial said: 'Success or failure when the market is as depressed as it is can sometimes be out of the dealer's hands. Lack of confidence becomes self-fuelling because each successive customer may well detect an increasing air of desperation about the sell.'

CAP blamed the Competition Commission, saying: 'The market has suffered a dramatic downturn in trade and retail demand. Dealers report slow or non-existent showroom traffic.

'Widely blamed is the Competition Commission report and public belief that lower car prices will spread all the way down the line from nearly new to old bangers.'