Less than two million cars were registered in 2011 it has been confirmed - 4.4 per cent less than in 2010.
Registrations in December fell by 3.7 per cent to 119,188 cars, meaning the market was down 1.8 per cent in the final three months of the year.
However, sales were ahead of the 1.92 million forecast at the start of the year, and notably diesel and alternatively fuelled cars both took record market shares.
Average new car CO2 emissions also fell to a new low of 138.1g/km in 2011, down 4.2 per cent on the 2010 level.
The market is forecast to be broadly stable in 2012, with firmer recovery expected in 2013.
"Weak economic growth will make trading conditions tough in 2012, but record numbers of new and updated models, significantly improved fuel efficiency and exciting new technologies will help to encourage consumers into showrooms," said Paul Everitt, SMMT chief executive.
"Business and consumer confidence will be the key to a successful year, so it will be important that government delivers on its growth strategy and helps to resolve instability in the Euro Zone."