Car prices in Britain are expected to fall by a fifth in the next three years, bringing them further into line with the EU average after the European commission yesterday definitively and unanimously endorsed a radical shake-up of the way in which new cars are sold in the single market.

In a long-awaited move that breaks the car industry's stranglehold over dealers once and for all, Brussels has given dealers the freedom to solicit or open for business anywhere in the EU. Until now their commercial activities have been confined to a specific geographical area, but in future a dealer from France, the Netherlands or Denmark - or anywhere else where prices are lower could set up shop in the UK.

"We're hopeful we'll see a price reduction of about 20%, or anything between £500 and £3,000, depending on the car," said Consumers Association spokeswoman Emma Harrison.

Under the new rules - which will be phased in over three years and do not require the government's approval - dealers will also be able to open up supermarket-style showrooms offering a selection of brands, rather than just one, as is the case at present.

After-sales service - which the EC estimates accounts for 40% of the cost of owning a car - will be revolutionised. Provided they meet objective minimum criteria laid down by manufacturers, any independent garage will be able to become an official service centre and have access to the same training, technical data, tools and spare parts as their manufacturer-backed rivals. The CA estimates British consumers are likely to save up to 30% in servicing charges during the next year alone.

To their chagrin, manufacturers will also lose their monopoly over "official" spares; garages will be able to buy directly from parts suppliers.

The CA, which has campaigned to narrow the difference between UK prices and those in mainland Europe, which EC studies have shown can be up to 60% higher, said it was delighted.

"This marks a great victory for consumers, as they have won the car price battle," said Sheila McKechnie, the association's director.

"We have always said that allowing dealers to offer competitive deals is the only way to lower prices. For years car manufacturers have cynically exploited British consumers by forcing them to pay high prices."

BEUC, the pan-European consumer lobby, said it was also "broadly satisfied" with the reform.

But the car industry - which has furiously lobbied to water down the proposed reform for the past two years - said it was disappointed.

"Some of the provisions of the new regulation are raising a number of concerns," warned the European Automobile Manufacturers Association. "We regret that these concerns... have not been en tirely addressed. It will be more demanding to preserve the interests of motorists and consumers at large."

However, there was some comfort for motor manufacturers. The fact that the phas ing-in period is now three years instead of two, as the commission originally intended was, critics suggested, the result of intensive behind the scenes lobbying from the German car industry.