New car sales increased by almost a third in January to 145,500 compared with the same month last year, new figures showed today.
The Society of Motor Manufacturers and Traders said the 30 per cent increase was better than the industry had been expecting.
The Government's scrappage scheme, which has been extended by a month to the end of March, accounted for a fifth of sales.
The SMMT said the increase in sales, the seventh monthly rise in succession, had come despite the rise in VAT and the cold snap, which caused disruption across industry.
But the trade group warned that the outlook was "constrained" and said demand for new cars was expected to fall by 9% to 1.82 million units in the full year.
"The 30 per cent increase in January new car registrations provides a better than expected start to 2010 for the UK motor industry," said Paul Everitt, SMMT chief executive.
"Scrappage continues to successfully lift demand and today's announcement of a continuation of the scheme to the end of March will allow the maximum number of people to benefit from the budget that's still available.
"The industry expects another difficult year with the availability of finance, consumer confidence and sustaining demand post-scrappage key to performance in the second half of the year, but signs of recovery in the fleet and business sectors are encouraging."
Ford models were the best selling cars last month. The Fiesta topped the list with sales of 8,861, followed by the Focus on 6,942.
The next best selling models were the Vauxhall Corsa (5,786), VW Polo (5,786), Vauxhall Astra (5,072), VW Golf (4,388), Peugeot 207 (3,815), Hyundai I10 (2,949), Audi A3 (2,738) and Fiat 500 (2,438).
Ford's Fiesta was also the best selling model last year.
The SMMT said the pace of growth in new car registrations was strong in January, despite the cold weather and the VAT increase which pulled some registrations into the end of 2009.
The January market was 17,000 units short of the 2008 figure but was 29.4 per cent up on January 2009 due to the severity of last year's decline.
"The scrappage scheme remains a positive influence on consumer demand and its continuation into March will ensure that the maximum number of people can benefit from the budget available," said the SMMT.
"As the impact of the scheme subsides the market is expected to slow to 1.817 million units over the full year - the lowest level since 1993. Volumes are expected to slowly recover to over two million by 2012.
"The January market was again primarily supported by improved private registrations, although the growth in fleet demand provides encouraging news for sustained demand post scrappage."
Registrations of alternatively fuelled vehicles jumped by 164.9 per cent to lift their market share from 0.6 per cent last January to 1.3 per cent.
Growth remained focused on the mini and supermini segments, but all car types posted growth in January apart from the upper medium and sports car markets.
The scrappage scheme, under which buyers receive a £2,000 discount when they trade in an older car for a new model, was due to run out on February 28, but has been extended to the end of March.
Business Secretary Lord Mandelson said: "Against the background of the economic downturn the scrappage scheme has proved a great success, driving UK car sales, protecting jobs and supporting the supply chain for car manufacture at a time when this sector needed it most.
"If you're considering buying a new car, you should place your order as soon as possible to avoid disappointment, because the budget is strictly limited."
In the final stages of the scheme manufacturers will be given order quotas to aid an "orderly" closedown.
- More about:
- Automotive Equipment (car Industry)
- Car Sales
- Compact Cars / Small Family Car