Industry competition and cheaper petrol set scene for a sweet summer’s driving — and some good car buys.

Motorists and most aspiring vehicle owners are expected to benefit from an increasingly competitive car business, diving petrol prices and falling levies.

As the holiday season nears, a report from accounting firm KPMG says a "squeeze on margins" is at work in all areas of the car industry.

It said carmakers setting high sales targets for dealers were contributing to the trend.

Clive Matthew-Wilson, editor of the car review site dogandlemon.com, said it was "a great time" to be a motorist.

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Cheap fuel and heavy competition were keeping drivers' costs low and options high.

"Vendors are eager to sell, so you shouldn't pay the asking price, whether you're buying privately or through a dealer. You can negotiate quite big discounts if you're smart."

But the picture was not so rosy for buyers at the bottom of the market, he said.

In summer, cheap cars got more expensive, due to heavy demand from backpackers.

Mr Matthew-Wilson said reduced ACC levies would not make a major dent in car buyers' habits.

ACC said there'd be an average fall in car levies in the next financial year from $194.25 to $130.36. The levy combined a petrol levy and licence levy.

"Wealthy people generally drive newer cars, which are far safer than older cars. People on low incomes buy unsafe cars, simply because unsafe cars are old and therefore cheaper," Mr Matthew-Wilson said.

Consumer NZ chief Sue Chetwin agreed it was a good time to be a car buyer, but said the window of opportunity could end soon.

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"Obviously with the New Zealand dollar a bit weaker, car prices probably aren't going to stay as low as they are for too long. But certainly at the moment the market seems very competitive and new car sales, or car sales across the board, are up."

She said other industries, especially tourism and hospitality, would likely benefit from cheaper petrol prices and buoyant car sales.

Ms Chetwin said generally, people travelled further when prices dropped. With the holiday season almost in gear, motels and hotels could enjoy flow-on effects.

She said the new ACC levies could make a small difference to some car buyers' habits.

Meanwhile, petrol prices were falling, with some retailers cutting prices three times in five days.

BP yesterday cut the price of its unleaded petrol 2c a litre, and diesel by 3c. It said the drop was the third national price decrease since Friday.

Automobile Association senior policy analyst Mark Stockdale said global commodity price falls were fuelling savings at local petrol pumps.

But he said there were no guarantees prices would keep sliding over the holiday season, as happened last year.

Last summer, diesel fell 23 per cent in two months and 91 octane dived 17 per cent.

Oil prices yesterday were at their lowest in seven years, with crude oil "collapsing" to less than US$37 a barrel, CNN Money reported.

Prices at the pump:

• November 17:
91 Octane: 193.9c
95 Octane: 202.9c
Diesel: 119.9c

• December 9:
91 Octane: 187.9
95 Octane: 196.9
Diesel: 111.9
(Source: AA PetrolWatch)