New car sales in the key month of March rose 1.8% to 372,835 vehicles, some 20,000 – or 6% – ahead of forecast, with sales to private buyers up 7.4%, the best monthly increase in more than two years.

The figures, released by the SMMT, show that Q1 sales were up 0.9% to 563,556. March, which marks the launch of the first of two registration plate updates a year for UK buyers, normally accounts for 18% of yearly sales.

“The important March new car market performed above expectations boosted by the third consecutive month of retail growth. Domestic demand for new cars is showing signs of recovery with private buyers increasingly returning,” said Paul Everitt, SMMT chief executive.

Despite the good news, sales in 2011 were weak and March’s figures were some 17% off the levels reached pre-recession in 2007, said the SMMT.

The association noted that, although registrations have risen in four of the past eight months, the underlying market trend is more about stability than growth. The 12-month running total has been around 1.95m units since June 2011.

Diesel cars continued to account for more than half of all new car sales, taking a 50.4% market share in Q1.

The Ford Fiesta remained the UK’s best-selling car, taking top spot in March and for the quarter, while UK-built cars accounted for 14.6% of total sales, up from 13.3% a year ago.