THE financial benefits of importing new cars into the UK from across Europe, where they have traditionally been cheaper to buy, have been wiped out.

A new study shows that new cars in the UK are now no longer more expensive than they are in other European countries.

Produced by car pricing analysis service eurocarprice.com, the study found that a combination of cut-price deals in showrooms and the strengthening value of the euro had brought UK new car prices down from 30% above the European average three years ago to level pegging today.

Eurocarprice.com managing director Rick Yarrow said: 'This is a mixed blessing for the UK car market.

'Low prices have fuelled record levels of new registrations in the last two years but the majority of cars sold in the UK are imported from the euro zone so the weakening of the pound is reducing the revenue to the manufacturer. This is likely to put upward pressure on prices to compensate for reduced manufacturer profitability.'

He added: 'It is debatable how much longer the UK's low-price car bonanza can continue while the euro remains strong relative to the pound. British dealers can now, of course, offer cars in Europe at more competitive pre-tax prices but most other countries impose higher taxes on new cars than the UK so it is unlikely that prices here will fall low enough to justify such trade.'

The study also found that the average retail prices for new cars in the UK rose by 2.1% over the 12 months to April 2003.

The movement in retail prices in the UK was 2.7% weaker than across Europe as a whole, where retail prices rose by an average of 4.7% in the year to April.

New car retail prices in the UK are the same as the average price of new cars in the euro zone.