More than 185,000 new cars were registered in January, a 1.8% increase on the 1999 figure.

But while company car sales were healthy, the number of private buyers was down by more than 10%.

It is the fourth successive month there has been a fall in the sector.

The motor industry has been struggling since last year because of the controversy over car pricing.

The Competition Commission has been investigating why UK prices are higher than those in other parts of Europe.

Its report was submitted to the government earlier this week and will be made public in a few weeks' time.

Car buyers have been holding off from making purchases until the report comes out, and dealers have suffered.

In December, there were only 85,000 registrations, 11.8% down on the previous year. Some dealers had reported business down by as much as 50%.

In an effort to boost sales, prices have been coming down - a recent survey found they fell by 2.4% in December.

The Society of Motor Manufacturers and Traders said that although the January rise exceeded its expectations, its forecast for the year as a whole remained unchanged at 2.2m vehicles.

"Despite wholly inaccurate speculation that car prices will fall dramatically this year, new car buyers are back in the market and today's figures reflect a surge of interest now that the millennium has begun," said SMMT chief executive Christopher Macgowan.

Whatever the outcome of the Competition Commission report, the way people buy their cars is certain to change.

Dealers under threat

Already some are travelling to Europe to make their own purchases. Others are hunting on the internet for the best prices. The traditional franchised dealer is under serious threat.

Trade Sales in Slough is one of a growing number of businesses which imports cars from Europe in bulk and sells them on at low margins.

It is moving several hundred each week, offering savings of many thousands of pounds on more expensive models.

"We stack them high and sell them cheap," says managing director Phil Gray. "The greedy manufacturers have had it good for too long."

Motologic has built up its own database of cars from dealers around Europe. Its agents visit customers in their home or office and go through the options on a laptop computer.

The company used to source 95% of its new cars in the UK - now that figure is down to 10%, with the rest imports and pre-registered vehicles.

A BBC survey found that saving money on a new car is not difficult:

List price for Ford Fiesta Zetec 125 five door hatchback - £11,200

Autobytel.co.uk - £9,845

Trade Sales - £7,999

Motologic - £7,815

Dealers might be bringing down their prices, but it is clear they have a fight on their hands to retain customers in the future.