City are a point above United on the Premier League table.
Neville said: “We’re behind City, which has not happened too often in the past 20 years.
“There is no doubt we have to see City as major challengers this season along with Chelsea.
“Both clubs are above us and the money City have spent, and the quality and depth in both squads, means we have to see them both as rivals.”
Neville added: “The difference between getting one point and three is the difference between us being top and being five points behind Chelsea.”