The Society of Motor Manufacturers and Traders reported 2.35 million private and fleet purchases were made last year, a drop of 3.9 percent compared to 2005 vehicle sales.
For the eighth year in a row Britain's best-selling car was the Ford Focus. Others in the top five were were the Vauxhall Astra, Ford Fiesta, Vauxhall Corsa and Renault Megane.
Christopher Macgowan, the society's chief executive, told the Guardian the decline should come as no surprise.
"Uncertainty, fueled by factors like interest rate rises, political uncertainty and fuel price fluctuations, conspired to make the market a difficult one," he said.
It's not all gloom and doom, he said, adding, "2007 promises a host of new models along with the potential for attractive showroom offers to tempt the buyer."