The big price rise

Over the past 12 months the average pre-VAT price of a car has shot up by 9% from 21,214 to 23,114. Thats compared with a rise of just 2.2% a year before.

So whats going on? Well, Ford inflated its prices more than any other manufacturer over the past year by 14.7% and it blames the exchange rate: Costs have increased due to
the pound/euro exchange rate, so Ford has had to raise its prices to offset some of these.

The hikes mean the official price of a Ford Fiesta is now above that of an equivalent VW Polo not what you might expect. However, VW has admitted that it might have to start hiking prices soon. Up to now we are handling the strength of the euro, but if the pound stays at a low level, prices will rise, said Dr Christian Klingler, group head of sales and marketing.

The Society of Motor Manufacturers and Traders (SMMT) agrees that the weak pound, compared with the relatively healthy euro, is the main factor behind the prices hikes, but added: Some manufacturers have also raised prices to regain some of the revenue lost by low sales volumes over the past year or so.