ANY hopes that the car industry may have had of a rapid turnaround in fortunes during the last quarter of 2005 have been dashed.

Sales of new cars are falling at their fastest rate since 1994.

Worse still, the biggest falls have been among private buyers, traditionally the most lucrative source of profit for car dealers and manufacturers.

Industry analysts say things will get worse before they get better. Statistics from the Society of Motor Manufacturers and Traders (the SMMT) show a five per cent fall in new car registrations last year compared to the previous 12 months.

The SMMT has estimated that this year will see the gentle slide continue. It hopes to end the year on 2.35 million registrations - a three per cent decline on last year.

The travails of car dealerships mirrors the desperation felt by high street retailers. Falling house prices and a general slowdown in the economy have led to a severe crisis of confidence among private buyers.

Christopher Macgowan, the SMMT's chief executive, said the industry was taking a sanguine view. He said: "People are not over-anxious, but no one likes things to head in the wrong direction. We are still well above two million cars."

Although last year saw the collapse of MG Rover, the SMMT is certain the ailing car maker had no effect on the figures.

Perversely, the last Rovers may have helped prop up sales as the administrator slashed prices to get rid of thousands of unregistered vehicles.

Professor Garel Rhys, the well-respected head of automotive research at Cardiff University Business School, said there was no need for panic measures.

Even if the decline continues, the 2006 sales figure will remain well above the psychologically important two million level.

British dealers are well aware of the difficulties their North American counterparts find themselves in after a vicious price war.

As sales started to drop, American car companies threw money at the market just to keep sales up. The result? A hefty loss on every new car sold and red ink all over the balance sheet.

* Ford remains Britain's favourite car manufacturer even though the best-selling Focus is facing intense pressure from the Vauxhall Astra.