New car registrations increased 2.5% year-on-year in May to 203,585 units, according to the Society of Motor Manufacturers and Traders (SMMT). This was the highest May figure since 2002.

As in the two previous months, market growth in May was led by the fleet and business sectors, where respective increases counterbalanced a fall in private registrations.

Private new car registrations decreased 3% year-on-year, from 91,811 to 89,094 in May. The private segment’s share of the market decreased from 46.2% to 43.8%. Fleet car registrations increased 8.8% year-on-year from 100,608 to 109,471.

Demand was up for diesel and alternatively-fuelled vehicles, which rose by 5% and 12.1% respectively. Petrol car sales dropped by 0.6%.

Reactions

Richard Jones, managing director at Black Horse said: "It’s encouraging to see new car sales continue to grow steadily, following the unprecedented growth levels of recent years. With increased manufacturer supply to the UK set to continue, it’s important that dealers continue to focus on a fast stock turn on all used vehicles and particularly late plate, as we approach another quarter end."

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By GlobalData

Sue Robinson, director of the National Franchised Dealers Association (NFDA), said: "We are pleased to see that although retailers from various sectors forecasted a modest slowdown in sales in May, new car sales continued to perform well.

"These results are in line with recent predictions that new cars sales will grow by 200,000 units in 2016 to a total of 2.8 – 2.9m vehicles, which would surpass last year’s record of 2.6m. Despite less stable economic conditions and short-term uncertainty ahead of the EU referendum, the car market has continued its upward trend and is set to remain strong this year."

Rupert Pontin, director of valuations at Glass’s said: "The May new car registration results show a consistent market increase more in line with the level that Glass’s expect for the time of year. A 2.5% uplift suggests that we are experiencing a normal level of demand without the excessive pre-registration activity that we experienced earlier in the year. The increase is focussed on the fleet sector which means that despite some concerns driven by the world economic position and a general lack of major investment in new initiatives, renewal of company fleets is still a priority.

"There is little doubt that the EU Referendum is having an impact on the car market as a whole, and consideration must also be given to the fact that Euro 2016 starts in a matter of days which means that June figures may be lower than expected. There are certainly plenty of distractions for the retail buyer at the moment."

Close Brothers Motor Finance chief executive officer James Broadhead commented: "The British car market continues to remain healthy which is no doubt thanks to the range of attractive finance options available, as well as the eye-catching marketing campaigns from many large car manufacturers. In fact our dealers have said finance options such as PCPs are becoming so popular among new car buyers that in some cases new cars are being bought at a cheaper short term cost than used vehicles.

"This poses a significant challenge to used car dealerships. Used car dealerships tend to operate on smaller margins and as a result, need to capture attention by offering excellent service at all stages of the buying journey. A knowledgeable salesforce, able to create a bespoke customer experience for every buyer, is vital to build customer confidence. While competition with new car sales will continue, dealers can address this by understanding the variety of finance options available. In particular, used car dealers must begin to make the most of PCP packages that have proven so popular among new car buyers. Introducing this form of incentive on a wider scale within the used car market will not only help drive an increase in used car sales, but it will also ensure that a tailored package can be offered depending on an individual’s circumstances."

Brands

Despite a 2.2% year-on-year decrease in sales in May, Ford remained the best-selling brand with 23,740 units sold.

Vauxhall was the second most popular brand, after selling 16,300 units in May – 21.25% less than the same month in 2015.

There were 16,050 Volkswagen cars sold (down 7.3% year-on-year), 15,423 BMWs (up 26.4% year-on-year) and 13,970 Audis (up 1.2% year-on-year).

The highest sales growth was recorded for DS (5,585% rise to 1,478 units), Ssangyong (64% rise to 310 units) and Jaguar (64% to 2,590 units).