The March plate change proved more popular than expected, despite underlying concerns with the economy.
Supermini registrations were up 4.3% in the month to account for 35.3% of the market. Diesel and alternatively fuelled vehicle volumes also grow, up 7.7% and 14.7%.
The private sector recorded a modest softening of demand in 2008, with a dip of just 1.4% in March and 2.4% over the first quarter.
Ford took the top two slots in March, with the Focus regaining its position as the best selling model in the UK.
March’s top 10 featured five superminis, the Fiesta being the highest placed. Supermini registrations rose by 4.3% in March, as demand for small, efficient, low cost cars rose.
Fleet and business demand both improved during March to give modest gains in the first quarter.
The SMMT said that as consumers move to purchase more efficient, lower CO2-emitting vehicles, registrations of diesels and alternative fuelled vehicles (AFVs) have risen.
Diesel registrations went up by 22,821 units in quarter one, and took a 41.9% market share, up from 38.4% a year ago. The Volkswagen Golf remains the top selling diesel model.
AFV demand was up 14.7% in March and were up 15.1% in the first quarter with Toyota Prius the best seller.
Paul Everitt, SMMT chief executive, said: "March continues to be the biggest month for new car registrations and this year has proved to be better than anticipated.
"We expect 2008 to be a challenging year, but registrations to date are in line with industry forecasts. The latest figures demonstrate the progress made by industry in delivering lower carbon cars and the wide range of opportunities there are for consumers to save money and reduce their carbon footprint."
Sue Robinson, director of the RMI National Franchised Dealers Association (NFDA), said: "Car sales in March experienced a boost thanks to the number plate change and consumer desire for smaller lower emitting vehicles, but the credit situation is likely to flatten the market over the next few months."
The sales increase seen in March may not last, according to Robinson: "Many of the vehicles purchased in March would have been ordered in January and February, before the most recent economic pressures came to bear. Consumers now face even higher household costs and a tighter credit market."
Robinson added that the Bank of England will announce its intentions for interest rates next week. The RMIF is urging the Bank of England to reduce the rate from 5.25% to give consumers "breathing room".
Jon Wakefield, sales director for Chrysler UK, said: "This is the best ever March sales volume for our brands in the UK, and a 20% increase on March 2007.
"This excellent result has also helped us to achieve our best ever quarter one sales volume, which has increased 12% compared to last year in a challenging market."
Peter Wyhinny, director of Seat UK, said of the strong sales performance for his brand: "Coming so soon after our previous record month, and with the new Ibiza five-door still a while away from its showroom debut, I’m particularly pleased by these March figures.
"With a raft of new products, including the new Ibiza, just around the corner I know our dealers will be gearing up for an even more frenetic time ahead."
UK new car registrations
Registrations by sales type
Top 10 best sellers