Luxury car tax may lower car prices: RACQ

The RACQ says Federal Government plans to add more tax to luxury cars may benefit buyers.

Treasurer Wayne Swan will use tomorrow's Budget to increase the tax rate on cars over $57,000 from 25 per cent to 33 per cent.

While the Federal Opposition says the move will drive up the price of all cars, Gary Fites from the RACQ says it could have the reverse effect.

"Given the strength of the Australian dollar and the fact that it is a very competitive business selling cars, I wouldn't be surprised if you saw makers or importers who are challenged with going over this limit actually looking at their pricing, looking at their specification," Mr Fites said.

"I wouldn't be surprised if we see in fact some tuning down of some prices just to make sure that some do come in under that limit."