Holidaymakers hoping to hire a car in Europe this summer may be in luck as the cost of rentals has decreased in line with the falling price of fuel, according to a new report. The Post Office Travel Services' Motoring on the Continent report found that this summer travellers will pay up to 12 per cent less for unleaded petrol and as much as 31 per cent less for diesel, hence making their car hire running costs considerably lower.

Sarah Munro, Post Office head of travel, said that the exchange rate was also helping matters. "Sterling is recovering just in time for the holiday season and combined with the price reductions for fuel and car hire, UK drivers can get more miles for the same money," she explained.

Brits are advised that Switerzerland is the cheapest place to currently buy unleaded petrol at 91 pence per litre, while Austria and Spain are the best for value overall, as motorists will pay around one pence for unleaded petrol, although considerably more for diesel.

In the Netherlands petrol is 34 per cent more expensive than in these countries as the nation proved to be the dearest of the 34 surveyed by the Post Office, with Norway coming in second.

"This year’s report shows more evidence of price cutting activity to boost tourism in popular European summer holiday resorts," said Ms Munro. "The huge drop in car hire costs in both Portugal and Greece is great news for UK tourists and is another factor that should be taken into consideration when choosing a holiday this year."

Perhaps surprisingly, the UK is now ten per cent cheaper for petrol than last year while car hire costs in Florida have rocketed due to rising fuel costs in the US and the knock-on effect of the weaker pound against the dollar. Consequently, it is estimated to be 64 per cent more expensive to hire a car in the US state this summer than last.

Meanwhile, the best value destination for car hire costs was Portugal where a 21 per cent drop in price has occurred since last year, with Greece next in line followed by Sweeden - both of which have also considerably lowered their charges.

Europcar.co.uk has advised travellers this summer to "re-discover the joys of holidaying at home" in a hire car.

Catriona Lougher, marketing director for the firm, said: "In a bid to save cash, families are reducing costs on car maintenance and even downscaling their car to a more economical vehicle."