Average car prices in Europe are rising more quickly than a year ago, according to the PricewaterhouseCoopers and eurocarprice.com quarterly pricing survey.

The growing popularity of diesel cars is behind the acceleration in overall price increases - Europeans are buying more diesels and fewer petrol cars, while diesel car prices are rising faster than those of petrol vehicles.

Diesel car prices were an average of 4.5% higher in June 2005 than in June 2004. Sales of diesel cars in the year to June were 13% higher than in the previous year. Petrol car prices have risen by 3.4% while sales declined by 7%. Across Europe as a whole, the average price of a car increased by 3.9% in the year to June.

A PricewaterhouseCoopers spokesman said: "Diesels now account for nearly half of all cars sold in Europe and there is no sign of the trend slowing. Manufacturers usually charge a premium for diesel models over petrol versions, so the inexorable rise in diesel sales will have a positive effect on their total revenues."

Diesels already account for 70% of new car sales in countries like France and Belgium. The largest annual rises in diesel sales were in Hungary (54%), Norway (45%) and Portugal (31%). Only Greece and Poland have seen diesel sales fall compared to a year ago.

According to the volume-weighted measure of relative new car prices used for the survey, the most expensive car market in Europe is Denmark where new car prices are 94% higher than the euro zone average. The least expensive is Czech Republic, at 8% below average.

The UK has the distinction of being the only car market in Europe apart from the Czech Republic, where car prices are falling. As the UK car market continues to decline (4% down), average prices are now 0.9% lower than they were in June 2004.

Diesel models now account for approximately a third of UK new car sales. Diesels are showing a small increase in prices (+0.6%) compared to a price drop of 1.5% for petrol models.

MPV (minivan) and SUV sales continue to increase strongly in Britain, and prices for these models are also rising. Saloon (sedan) sales and prices, in contrast, are declining in the face of the marked shift in UK drivers' buying preferences.

Nearly 25% of sales in the lower medium segment are now MPV models, which accounts for the overall continued growth in this segment. Healthy growth in luxury car sales is largely due to increased sales of SUVs such as BMW's X5.

The picture for the "big five" markets is mixed. The Spanish market continues to grow strongly, with significant price increases. Sales in France and Germany are rising slowly, with below-average price increases. Italian prices continue to increase significantly despite the market there declining. The UK market is dropping and prices are now also decreasing slightly.

Norway and Denmark are experiencing the largest market growth in Europe. The market in Finland dropped by over 15% in the year to June compared to the preceding 12 months. Prices in these countries are well above the European average, particularly in Denmark due to exceptionally high levels of taxation, although pre-tax prices are generally lower than in other countries.

Sales fell in Eastern Europe, particularly in Poland and Czech Republic, where price increases were also below average. The UK and the Czech Republic are the only two markets where prices are dropping.