"These pressures are likely to make worried consumers very careful about splashing out on as big-ticket an item as a car, and it is worrying for car retailers that consumer confidence suffered its sharpest monthly fall since 1992 in January to be at a 22-month low. The substantial fiscal squeeze will increasingly hit public sector jobs and consumers' pockets, while households already face high unemployment, negative real income growth and elevated debt levels. In addition, there is the very real likelihood that the Bank of England could raise interest rates before long."
Despite the challenging conditions, the demand for low CO2 emitting and highly fuel efficient cars continues to grow.
Diesel car sales rose and their market share was once again over 50pc in the month. Alternative fuelled cars matched their record share of 1.4pc of the market.
Demand for the mini and supermini segment, boosted by the scrappage scheme a year ago, fell sharply this January, while that for executive, luxury, MPV and dual purpose segment cars recovered strongly.
UK-built cars took a 12.9pc share of the January market, unchanged from January 2010.
The Ford Focus was the best selling new car in January and also the top-selling diesel model in the month.
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