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The UK has gone from being one of the most expensive countries in Europe to buy a car, to one of the cheapest, researcher claims.

Only in Italy are average pre-tax showroom prices lower than those in the UK, according to the base price index which compares car prices in 19 countries against the average price of a new car in the euro currency zone.

The research also shows that UK pre-tax prices are now 7% below the average in Germany.

The retail price index section of the research shows that the average retail price of a new car in the UK is now 500 euros lower than the average price of the similar car in the euro currency zone.

A spokesman said: “Continental suppliers now find it very hard to undercut UK car dealers’ prices. With May’s new car registrations the second highest on record and buoyant industry forecasts for the remainder of the year, the short term prospects look bright for UK retailers.

“The result of the weaker pound versus the euro has significantly reduced the revenues to manufacturers of cars sold in the UK. Overall, the poor profitability of all manufacturers will increase pressures for price rises in this country. In the meantime, UK consumers are the winners with car prices in real terms lower than they have been for many years.”