NEW car price-cutting is likely to bottom out following year-on-year price reductions averaging a record 6% last month. The latest CAP Motor Research New and Used Car Price Index says that most car manufacturers have now cut prices and dealers, many of whom have had their margins sliced, now need to restore profit margins.

The largest price reductions were in the lower and upper medium sectors where price falls averaged 8.8% and 6.1% respectively. Prices also tumbled by an average 6.1% in the executive sector. Meanwhile, the gap between UK new car prices and rival continental European countries has narrowed by 50% in five months, it was claimed this week. Latest atest figures from the Credit Suisse First Boston New Car Price Index show that average pre-tax car prices in the UK are 21% higher than the European average compared to 42% higher in August 2000.

The Society of Motor Manufacturers and Traders' chief executive Christopher Macgowan says varying taxation systems across Europe is the primary cause of new car price differences - pre-tax prices are traditionally cheaper in Denmark than anywhere else because of car taxes running at almost 200% - and argues that the key to harmonising prices is fiscal changes.