High interest rates and expensive fuel costs caused new car sales in June to slump, according to new figures, although diesel models are continuing to grow.

The Society of Motor Manufacturers and Traders (SMMT) revealed that 227,623 new cars were sold in June – a whole 4.8 per cent lower than this time last year.

SMMT feels another demand-denting factor could have been the recent collapse of MG Rover.

Even so, despite the bad news, SMMT is playing down the fall, saying: "Downturn is not as severe as the comparison to 2004 suggests.

"The new car market could not sustain the record levels seen in the first half of 2004," explained chief executive Christopher Macgowan.

Yet, he pointed out that although dealers are feeling pinch it "is good news for consumers".

"You have all the ingredients of a true buyer's market," explained Mr Macgowan, pointing out that car prices have dropped ten per cent since 1998.

As such many manufacturers are relying on financing deals and special offers to tempt customers into the showrooms.

Total sales in the first six months of 2005 were 1.23 million, down almost six per cent from a year ago.

Sales of petrol cars have also declined, while sales of diesel vehicles continue to grow.