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Motorists are speeding up the purchase of their next car after the Conservative and Liberal Democrat's emergency budget declared VAT will rise to 20 per cent.

The VAT increase takes effect next January, increasing the price of a new family car by around £500, according to a market research survey.

With almost 40 per cent of drivers considering buying a new car in the next year, the months leading up to the rise could provide the motoring industry with a short-term boost.

It should also have a positive impact on the used car industry, with 12 per cent of motorists expected to buy a second hand car within a year.

"The VAT increase will provide a short-term, much-needed lift for the British car industry", said a spokesperson for GfK NOP, the market research company responsible for the survey.

GfK NOP's results also showed more than one third of middle to high income earners will be considering downsizing to a smaller car as the cost of motoring continues to increase.

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