New car sales fell 4.4% in 2011 compared with 2010, official figures today showed.
A total of 1,941,253 new registrations were recorded last year, the Society of Motor Manufacturers and Traders (SMMT) said.
This compared with a figure of 2,030,846 for 2010 when sales were boosted by the Government's car scrappage scheme.
New car sales in December 2011 totalled 119,188 - a 3.7% drop on the December 2010 figure.
SMMT chief executive Paul Everitt said 2011 was "a challenging year" for the UK motor industry, adding: "Total new car registrations were slightly ahead of industry but still down on 2010.
"Weak economic growth will make trading conditions tough in 2012, but record numbers of new and updated models, significantly improved fuel efficiency and exciting new technologies will help to encourage consumers into showrooms."
He went on: "Business and consumer confidence will be the key to a successful year, so it will be important that the Government delivers on its growth strategy and helps to resolve instability in the eurozone."
In the second half of 2011, sales fell just 1.1% compared with the July-December 2010 period.
The full-year figure was 18,000 units, or 0.9%, ahead of SMMT's forecast for 2011, set in September.
At that time the new car market in 2012 was expected to hold at just over 1.96 million units and grow to just under 2.05 million units in 2013.
The SMMT said today that since those forecasts were made, independent forecasts for the UK economy had been downgraded, with concerns in particular over the eurozone crisis and consumer confidence.
Registrations in 2011 were supported by fleet sales, with the private market recording a drop in volumes.
Diesel and alternatively fuelled cars took record shares of the market in 2011, with diesel volumes surpassing petrol volumes for the first time.
Average new car CO2 emissions fell last year to a new low of 138.1gm per km - 4.2% down on the 2010 level and 23.7% below the figure in the year 2000.
The Ford Fiesta was the best-selling new car in 2011, with the Volkswagen Golf the best-selling diesel model.
The supermini segment remains the largest in the UK, with a market share almost unchanged on 2010 at 36.3%. The executive, luxury saloon and dual-purpose sectors all recorded growth in registrations in 2011.