A leading industry insider has warned that car companies may force the UK car market higher by pre-registering thousands of new cars to themselves, reducing the resale value of cars bought by legitimate customers.

Pre-registrations, theoretically outlawed by the government 10 years ago by a law with more holes than a sieve, are when car companies want to show they are selling lots of cars. They register the cars to themselves, their dealers or big fleet customers, only for the unwanted cars to re-appear on the market a few months later, with hugely discounted prices.

Adrian Rushmore, managing editor of Glass's Guide has said that the collapse in demand in Southern Europe means that car companies are being tempted to divert production to the UK. In Britain, at least the car can be sold as a pre-registered vehicle for something, even if nowhere close to its new price.

These cars make great bargains for buyers who do not mind a few miles on the clock – and sometimes it really can be under 10 miles. However, it is bad news for people who buy genuinely new cars, because their cars instantly drop in value to the level of a pre-registered example.

Dealers are already publicly warning that they are coming under pressure to register cars that have no buyers. Industry newsletter www.auto-retail.co.uk quoted a statement from Vertu Motors saying that increased pre-registration activity in recent months is distorting the new car market.