The ongoing effects of the economic downturn have once again impacted on sales of new cars.

New vehicle sales declined in August, with further falls predicted for the remainder of the year as Britain steels itself for an increase in VAT and watches its spending following the austerity budget.

Last month saw a total registration of 55,305 new cars, a 17.5 per cent decrease on comparative figures from the same period a year earlier, which was fuelled by significant car scrappages, says the Society of Motor Manufacturers and Traders (SMMT). The August drop came on the back of a similar decline in July, which represented the first fall in new car sales for 12 months. Additionally, insurance claims are fallen markedly as their cost has grown by 30 per cent in the past year.

Registrations for new vehicles grew in the second half of 2009, when the scrappage scheme was first introduced, implemented after dramatic falls in sales during had plagued the industry during the first half of the year. With the scheme finished, analysts predict sales for the second half of this year will suffer a negative rebound.

However, in spite of the past two months of falls, new car sales for 2010 so far are still up overall by 13.2 per cent compared to the same period in 2009. The biggest increase was seen in diesel-fuelled vehicles, which grew by 52.6 per cent, while multi-purpose vehicles, luxury saloons and sports vehicles also increased. The largest falls were in the small to medium car market.