An Office of Fair Trading study has called on car manufacturers to lift restrictions on where new cars can be serviced.

Manufacturers offer a warranty of one to three years on new cars, to cover any problems or defects that might occur. Many also offer 'dealer-based' extended warranties, under the terms of which the car must be serviced by a garage belonging to the manufacturer's dealer network.

After-sales service generally amounts to about 40% of the lifetime cost of a car and in the UK, motorists spend around £10bn a year on maintenance and repair. About £1.4bn of that is spent on looking after cars under than three years old, and franchised dealers receive about 90% of that business.

Since franchised dealers often charge more than independent garages, despite the fact that there is no difference in the standard of service received, the OFT estimates that car owners could be paying as much as £500m more than they need to be.

The OFT wants servicing restrictions such as these to be removed. If the car manufacturing industry fails to do so, it has said it will consider launching a formal investigation under European competition law.

John Vickers, OFT Chairman, said: "Competition and consumer value in the after-sales market are inhibited by restrictions on the car servicing choices of car owners.

"The car industry now has the opportunity to address the concerns in our report, and we welcome the recent moves by some manufacturers to remove servicing restrictions."