The employers and unions said the lengthy meeting on Tuesday was constructive and a negotiated settlement could be worked when talks resumed on 14 September. Both sides identified areas where compromise could be made.
The employers agreed to reconsider their proposal to end the distinction between casual and essential users. They also agreed to look again at the safeguarding arrangements proposed to protect existing users.
The unions said they were prepared to talk about changes to the technical composition of the formula for determining allowances.
They also want to remove reimbursement for garaging costs which is part of the allowance.
'I am reasonably encouraged about the outcome of the meeting. But there is still a lot of detailed negotiations before we can say we have got a package together', said Staff Side Secretary Dennis Reed.
Both sides agreed to 'use their best endeavours' to stop the dispute escalating, beyond any measures which may have been agreed by 31 August. Unison estimates about 130 local branches have balloted to escalate action at local level with measures like refusing to use hire cars.
Branches will decide whether to proceed with additional action or await the result of the 14 September meeting.
Mr Reed said until a settlement package was thrashed out which could be recommended to members, Unison would not consider suspending the national action.
Unison - or NALGO as it was then - has been in dispute with the employers over car allowances since January when the employers refused to update them for 1993.
In the past the allowances were updated annually on the basis of recommendations from independent experts. Industrial action began in July with members refusing to make private cars available for council work.