New car sales fell for the first time in six years last year with demand for diesel cars plunging by almost a fifth.
In total, there were around 2.5 million cars registered, according to industry body the Society of Motor Manufacturers and Traders (SMMT).
The figure was down 5.6% from 2016, while diesel sales fell 17% as higher taxes and pollution fears hit demand.
SMMT chief executive Mike Hawes said he expected car sales to continue to drop this year, predicting a 5 to 7% fall.
The figures are preliminary, with final numbers for the year due to be published later.
Mr Hawes blamed the sales fall on declining business and consumer confidence, but pointed out last year's performance followed two years of record sales.
"We need to put it into context. This was still the third best year in a decade and the sixth best ever," he added.
Mr Hawes said that confusion about the future of diesel had fuelled a backlash against diesel cars.
Diesel vehicles produce the overwhelming majority of nitrogen oxide gases coming from roadside sources.
Analysis: Theo Leggett, BBC business news reporter
It's fair to say the steep decline in demand for diesel cars is causing both frustration and consternation within the motor industry.
The industry needs to sell diesels, because they are generally more fuel efficient than petrol cars and therefore produce less carbon dioxide.
That helps car companies to meet targets for reducing CO2, introduced in order to combat climate change.
But concern about the level of nitrogen oxides (NOx) they produce has made them a favourite target for clean air campaigners.
The industry talks about a short-sighted backlash against new technology, which is encouraging people to stick with older, dirtier cars – and preventing sales of newer, cleaner models.
But it's worth remembering where the backlash against diesel really began: with the VW scandal.
It didn't just expose wrongdoing at one company – it also showed how the industry as a whole was building cars that routinely produced emissions far above the legal limits.
So you could argue that carmakers really have themselves to blame.
Diesel car sales fell by almost a third in December after November's Budget which introduced a levy on new diesel cars that failed to meet the latest emissions standards.
Experts said the one-off tax increase – which comes into effect in April – would be applied to most new diesels.
Mr Hawes said for many drivers diesel was still "the best bet because they can save a lot of money and indeed have a lower C02 emission".
As a result of the switch away from diesel cars, which have lower carbon dioxide emissions, he said that the SMMT's annual report on C02 emissons from new cars was likely to show an increase for the first time in 20 years.
"The backlash against diesel has made it far harder for us – and the government to meet our climate change targets," he said.