Since the change to a twice-yearly registration plate in 1999, the market has averaged 2,431,330 units. The 2004 tally was 5.6 per cent, or 135,939 units, above this level.
The Society of Motor Manufacturers and Traders is predicting a 2005 market of 2.465 million units, 4% down on the 2004 total.
Private sector volumes dipped compared with last year's high, but have averaged 1,148,717 units for the past six years.
At 1,093,494 units the large fleet market (25 or more vehicles in the fleet) recorded a highest ever annual total. This followed a 2.4% rise in annual volumes.
Business demand ended the year on a high, with strong December growth. The business sector hit a record 273,709 units in 2004, largely based on strong first quarter performance.
The Ford Focus headed the best sellers' list in all but one month in 2004 and in December outsold all other rivals by almost 90%. In 2004 it took a 5.5% market share after improving its own volumes by 7.1% on 2003.
Diesel sales continued to surge with volumes jumping by 130,697 units in 2004 to a record 835,334 units. This was above forecast and equal to a record 32.5% market share.
The Focus was the best selling diesel model in 2004, followed by the Mondeo and Golf.
Diesel penetration hit 34.8% in December and averaged 36.4% in the final quarter. It hit a record high of 37.2% in October 2004.
SMMT chief executive, Christopher Macgowan says: 'Last year was only the third on record where new car registrations broke the 2.5 million barrier. However, despite strong first quarter demand and growth in November, we missed taking the run of consecutive record years to four by just 11,781 units.
'The market for 2005 is expected to reach around 2.465 million units which, in the context of the last 10 years, remains a robust forecast. Nevertheless, our expectations point to a slightly weaker market than in recent years, a reflection that the automotive industry is not immune to the competitive pressures affecting other sectors.'
Alan Pulham, franchised dealer director for the Retail Motor Industry Federation (RMI) says: 'UK car dealers have delivered exceptional value and retail performance to the consumer in 2004.
'Sales have reached levels virtually as high as 2003's record, and this is a further indication of the very high standard of service being provided to the British consumer.'
He added: 'With free serving, insurance, and extended warranties now commonplace, consumers know that when they buy a car they are getting a great deal. With the high expectations of the UK motoring public being more than met by UK dealers, 2005 looks set to be another great year.'