January new car registrations rose by 29.8% to 145,479 units despite the return to the 17.5% rate for VAT and a cold snap which ground the country to a halt.
The scrappage scheme continued to boost the market accounting for 17.8% of registrations and the news that the scheme will be continuing until the end of March will allow dealers to get those final sales in.
Paul Everitt, SMMT chief executive, said: "The 29.8% increase in January new car registrations provides a better than expected start to 2010 for the UK motor industry.
"Scrappage continues to lift demand successfully and today’s announcement of a continuation of the scheme to the end of March will allow the maximum number of people to benefit from the budget that’s still available.
"Industry expects another difficult year with the availability of finance, consumer confidence and sustaining demand post-scrappage, key to performance in the second half of the year, but signs of recovery in the fleet and business sectors are encouraging."