New car registrations have risen 9.3% in July, compared to the same month last year.
According to the Society of Motor Manufacturers and Traders (SMMT), registrations have risen more 3.5% in the year.
It said that in 2012 a total of more than 1.2 million new vehicles have now been registered.
Although all fuel-types saw an increase in sales, alternatively-fuelled registrations were boosted by 45.9%, to 2,079 units.
"SMMT's full year forecast is for 1.97 million cars to be registered in 2012 suggesting a slight slowing of demand in the second half of the year," SMMT chief executive Paul Everitt said.
"International economic stability remains a concern for vehicle manufacturers and the UK market, but intense competition and new fuel efficient products are creating great opportunities for motorists."
The five bestselling cars in July were all small vehicles, with the Ford Fiesta the top car for both July and 2012.
The SMMT said volumes in 2012 have been aided by the "pent-up demand" after the market was distorted by the scrappage incentive scheme.
It comes as the Confederation of British Industry (CBI) has reported that small businesses have seen their first fall in quarterly output since October 2009.
The CBI also said that investment intentions for plant and machinery tumbled 13% - the weakest in three years.
Lucy Armstrong, chair of the CBI's Small Business Council, told Sky News: "There is both supply side issues and demand side issues."
"The challenge for the Government is it can do lots of things on the supply side to try and encourage people, but actually you need to boost that demand and if people don't want to take extra finance, if they don't want to make long term investment and if they feel uncertain it will deliver a return, they're not going to do it."