The UK is the only market in Europe that is seeing any significant car price movements and the latest Credit Suisse First Boston (CSFB) new car price index confirms that the gap between UK car prices and the rest of Europe has reduced by eight points to 120 per cent of the average in euro currency countries.

The index tracks the prices of over 2000 models across 19 European countries, based on data supplied by JATO Dynamics Ltd.

The index, based on prices as at 15th December, shows that UK list prices are 20% higher than the average for euro currency countries compared to 28% in August. Recent price reductions were initially focused on the higher priced segments, but these have now come through in the smaller car segments.

The largest differentials however are in the smaller car segments where many models are still over 30 % higher than the European average. The UK however does not have the highest list prices in Europe with Ireland, Finland, Norway and Denmark all higher due to high car taxation levels in these countries.

The CSFB new car price index also measures pre-tax prices across Europe, adjusted for the specification differences between markets. This shows that the UK still has the highest pre-tax prices at 29% above the euro currency country average, with Greece having the lowest average pre tax prices (-16%).

Commenting on the index, Professor Peter Cooke from the Centre for Automotive Industries Management at Nottingham Business School, said: "The index shows that the UK Government's orders on the supply of new cars are beginning to have an impact across the market; that has to be good news for the new car buyer.

"Fleet buyers may be losing out on their traditional discounts, which could escalate the cost of business mileage. However, I have grave concerns as to what the decline in real terms will do to the equilibrium of the used car market where prices have slipped over the last eighteen months."