The cost of buying a new car is continuing to fall, according to the latest figures.

Falling second-hand values mean trade-ins are now worth less

David Motton What Car?

Research by Alliance & Leicester bank and What Car? magazine showed that new car prices fell 2.7% last month compared with May 2001.

May's fall followed a 2.5% drop in April 2002, and is the sixth monthly fall in a row.

However, while most car prices fell, people who bought luxury new cars last month were hit by an average increase of 3.8%.

Nearly new

The cost of buying a nearly new or a one-year old car also fell for the sixth consecutive month in May.

How prices have changed*

Small cars -�678 Family cars: -�4 Executive: -�332 Luxury: +�1,786 *Source: What Car? Change over last 12 months

Prices fell by 6.2% last month compared with May 2001.

"Used" cars, the term used to describe three year-old cars in the survey, fell year-on-year by 7.5% compared with a drop of 9.8% in April.

The biggest price drop benefited people buying family cars, with prices falling by 12.1%.

David Motton, consumer editor of What Car?, said: "Though some manufacturers have made small price increases, these have usually been accompanied by increased specification levels and healthy discounts.

"So transaction prices have continued to fall, though falling second-hand values mean trade-ins are now worth less, too."