UK new car registrations fell 15.7% in June to 176,264 units, the smallest monthly year on year decline since July 2008, although year-to-date demand fell 25.9% to 924,955 units.

The Society of Motor Manufacturers and Traders (SMMT) said the scrappage scheme was "now beginning to deliver registrations to the market" while a shift to smaller cars continued, with mini and supermini segments "doing well".

SMMT had expected the market to decline to 153,000 units (as forecast in April).

"We are now beginning to see the positive impact of the scrappage scheme translate into new vehicle registrations," said Paul Everitt, SMMT chief executive.

"SMMT expects the pace of improvement to increase in the coming months, but we can already see the industry making steady progress on the long road to recovery."

Registrations to private buyers rose for the first time since November 2007 in June, up 3.9% to 86,638 units.

The mini car segment posted growth of 145.4% in the month, while superminis took a record 37.2% share. Ford's Fiesta was the best selling model for the fifth time this year.

The growth in small car demand contributed to the fall in diesel penetration, with small cars tending to be petrol powered. However, diesel market share was still up year to date.

The market remained down 25.9% or 322,524 units in the first half of the year. Volumes in quarter two were down 21.2%, marking a sixth successive quarterly decline.

SMMT is due to review and revise its full year forecast later this month.