Demand in new cars fell 3.4% in March over uncertainty with Brexit and Diesel, and consumer confidence has been hit.
In March around 458,000 were registered compared with 474,000 during March 2018, the Society of Motor Manufacturers and Traders (SMMT) said.
Traditionally March is a crucial month for the industry, as the new plate brings buyers in to car showrooms.
Fleet sales marginally rose by 0.3%, and business and private registrations dropped by 2.8% and 44.8% respectively during March.
Diesel models dropped by 21.4% and petrol models increased by 5.1% year-on-year in March.
Mike Hawes, SMMT chief executive said, “March is a key barometer for the new car market, so this fall is of clear concern.
“While manufacturers continue to invest in exciting models and cutting-edge tech, for the UK to reap the full benefits of these advances we need a strong market that encourages the adoption of new technology.
“That means supportive policies, not least on vehicle taxation and incentives, to give buyers the confidence to invest in the new car that best meets their driving needs.
“Above all, we urgently need an end to the political and economic uncertainty by removing permanently the threat of a no-deal Brexit and agreeing a future relationship that avoids any additional friction that would increase costs and hence prices.”
In a bid to tackle air pollution the department for transport has announced to ban new diesel and petrol vehicles in the UK from 2040.