New car registrations fell by 30.9% in January to 112,087 units.
Paul Everitt, Society of Motor Manufacturers and Traders chief executive, said the results showed that there was a clear need to stimulate demand for new vehicles in the UK.
He said: " A number of EU member states have launched scrappage incentive schemes, which have the benefit of boosting consumer confidence and delivering significant environmental improvements.
"The UK motor industry is urging UK government to introduce a similar scheme and help sustain jobs and businesses throughout the sector."
Diesel market share rose slightly by 0.7 percentage points to 45.6% - the second highest rate ever.
The SMMT is expecting the market to decline by a fifth this year to 1.72 million units and will continue to call on the Government to help stimulate demand.
"Consumer confidence remains key to reviving car sales in 2009, and this is where the Government must focus," said Sue Robinson, director of the RMI National Franchised Dealers Association (NFDA).
Lord Mandelson’s support measures for the car industry, announced on January 27 in the House of Lords, were “too little, too late”, she said, to help revive new car sales as we enter 2009.
"Despite reports to the contrary, consumer credit is still available to those who want to replace their vehicle.There has been a vast improvement in used car sales in the last month, as consumers feeling the pinch look for great value for money on used vehicles," said Robinson.
"Consumers are looking to the used market for value-for-money, but in many cases new cars can offer equal value equal to used vehicles, when the savings provided through warranties are taken into account."
The RMIF is continuing to lobby for the introduction of a self-financing scrappage scheme could help revive car sales, and remove high-polluting cars from the road at the same time. The RMIF will shortly be presenting a paper to Government that puts the case for a self-financing scrappage scheme in the UK that mirrors those successfully adopted in other EU states.