Year-to-date registrations were down 3.1% to 231,707 units.
Paul Everitt, SMMT chief executive, said: “New car registrations fell in February in line with market expectations.
“It is important that the chancellor uses next week's budget to help boost consumer confidence and avoids disruptive or disproportionate changes to vehicle and fuel taxation.”
The private sector reported a modest net gain in market share in February, moving from 32.9% in 2007 to 33.3%. However, the volumes still declined and were down on a subdued 2007 performance.
The Vauxhall Astra took the top spot in February, pushing the Focus into second place. Vauxhall was also the UK's best selling marque in the month. It had four of the top ten best selling models.
Diesel registrations posted a fifth successive month of double digit growth and were the best ever February figures.
Demand for alternatively fuelled cars also rose strongly in the month, up 21.4%, to boost volumes to 1,654 units over the year-to-date.
Sue Robinson, director of the RMI National Franchised Dealers Association (NFDA), said: "February’s car sales drop was not unexpected, but with consumer confidence still fragile, the Bank of England would have been better advised to cut the interest rate rather than hold at the current level.
"What consumers need now is a further rate reduction. The softening of the housing market has led to consumers reining in their spending. The market needs encouragement which only an interest rate cut could provide."
UK new car registrations
Registrations by sales type
Top 10 best sellers