New car registrations last month were up 1.5% on January 2000 at 187,908 units fuelled by private retail sales.
Ford reinforced its market leading position with 36,069 units, a healthy 19.2% share of the market, up more than 3% on its 12-month average of 16.85% last year. Ford's leading rival Vauxhall slipped by 15% to 24,573 (13.08% market share).
SMMT chief executive Christopher Macgowan said the results showed consumer confidence had returned to the market after the uncertainty caused by the Government's pricing demands.
"For the fourth month in a row we have seen a rise in new car sales fuelled by the private sector," he said. "Buyers continue to benefit from stronger competition than ever with lower prices, better specified cars and longer warranties.
"January's registration figures are just the latest in a string of good news for the motor industry."
The SMMT predicts a 2.25m market this year - "bouyed by a positive economic outlook" - up slightly on 2000.
Private sales were responsible for 46% of the market last month - 87,062 units - up 28.4% on last year. In contrast, fleet sales slumped 13.8% to 82,982 units, taking a 44.2% market share.
Business sales also fell, by 14.8%, to 17,864 units.
Analsysts blamed the poor fleet performance on pricing pressure from the Government, which has encouraged some manufacturers to moved out of the less profitable fleet sector.
RMI franchised dealer director Alan Pulham said the results were "outstanding news" for the industry.
"2001 has started with a bang and in January private new car customers have flooded back into showrooms," he added.
Citroen had a strong sales month, taking 4.41% of the market - 8,288 units - up 59.54%. Also performing well were: Audi, up 33% to 3,993 units; Fiat, up 21% to 8,467 units; Land Rover, up 66.6% to 2,827 units: and Seat, up 68.8% to 2,002 units.
MG Rover continues to struggle. Registrations fell 12.32% to 7,229 units, 3.85 market share.
Daewoo is suffering from uncertainty caused by its Korean parent's collapse, with sales down 62.12% to just 966.