Despite the return of the 17.5 per cent VAT rate, 145,479 new cars were registered over the month, a 29.8 per cent increase on last year.
This made January the seventh month in a row in which new car registrations had improved over the same period in 2009. But the SMMT said the sector was yet to return to 2008 levels.
The Scrappage Incentive Scheme was introduced in April to stimulate the flagging vehicle market, encouraging sales by offering anyone trading in a 10-year-old vehicle £2,000 towards a new one. It was extended last week until the end of March.
Paul Everitt, chief executive of the SMMT, said the extension was welcome: “Scrappage continues to lift demand successfully, 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.”
However, analysts warned that the market would suffer when the scheme ended. Mike Steventon, a partner with KPMG’s automotive group, said: “The car scrappage scheme has recently ended in Germany and new car sales in January 2010 fell to its lowest level in 20 years. It is highly likely that UK new car sales will also experience a significant reduction following the end of the UK scrappage scheme.”