Car buyers are still generating strong demand for new and used Rovers and MGs, dealer group Reg Vardy said.

The company is doing good trade at its three remaining MG Rover dealerships in the north of England, it reported yesterday.

Vardy, which operates nearly 100 dealerships covering eight brands, also said it expects to limit the financial fall-out from the collapse of MG Rover to a one-off special charge against profits of £2.8 million.

The charge is to cover write-downs of the value of unsold cars and to cover the cost of uninsured warranty work on behalf of MG Rover customers.

Vardy was left with three northern MGR dealerships after closing one in Scotland in March just before the collapse.

"These dealerships are currently selling new and used MG Rover vehicles, demand for which remains high from the British consumer," the company said yesterday.

"Over the next six months these dealerships will be refranchised to other brands but will retain the aftersales capacity to service the large number of MG Rover customers in these areas."

Also yesterday, chief executive Sir Peter Vardy gave voice to his sadness at the way MG Rover collapsed.

"I am not happy about the situation," he said.

"I met with key executives of MG Rover in January and they assured me everything was all right and that a deal w i t h

SAIC was going through.

"Then the whole thing started to unravel and Rover ends up in administration.

"After a 20-year association real shame. I am very saddened by the way things have turned out."

Sunderland-based Vardy yesterday announced a four per cent dip in annual pretax profits to £43.8 million after taking exceptional items such as the MG Rover charge into account on sales seven per cent up at £1.72 billion. Sir Peter said the results for the year to April 30 reflected the fall in new car sales since May 2004 although current trading levels are ahead of the same period last year.

The improvement was mainly due to gains kicking in from underperforming acquisitions and cost savings.

But he played down hopes of a revival this year, although managing director Robert Forrester said that an estimated 2.45 million units the UK the market was still running at near record levels.

Sales of smaller vehicles were hardest hit during the downturn which had been most severe between January and March.

But the loss of confidence among consumers was not reflected by businesses operating vehicle fleets and the firm said this market remained buoyant throughout last year.

Vardy has stepped up its acquisitions drive in recent months and last week exchanged contracts with the Priory Motor Group for the purchase of five dealerships for £15.5 million.

All of the sites are based in North Tyneside and the deal will boost the number of dealerships operated by Reg Vardy in the UK to 98.