The Government's "cash for bangers" car-scrappage scheme is slowing the decline in new vehicle sales, figures out today revealed.

The number of new cars sold in the UK last month totalled 176,264 - a 15.7% drop on the June 2008 figure, the Society of Motor Manufacturers and Traders (SMMT) said.

But the month-on-month fall was the smallest since July 2008.

The car-scrappage scheme - in which owners of cars more than 10 years old get £2,000 off the price of a new motor when they trade in their old vehicle - was introduced on May 18, so the June figures represent the first full month when the initiative was in operation.

SMMT chief executive Paul Everitt said today: "We are now beginning to see the positive impact of the scrappage scheme translate into new vehicle registrations.

"We expect the pace of improvement to increase in the coming months, but we can already see the industry making steady progress on the long road to recovery."

In April the SMMT predicted June sales would fall to around 153,000 units. so the actual June figure was about 15% higher than anticipated.

Significantly, private buyer registrations were up 3.9% last month, the first rise in this sector since November 2007.

Also, demand for small cars picked up with the mini segment showing a huge 145.4% growth and superminis taking a record 37.2% share of the market.

Even despite the more encouraging figures for June, sales for the year so far are still 25.9% down on the total for January-June 2008.

These were the top-selling cars in June 2009:

1. Ford Fiesta
2. Ford Focus
3. Vauxhall Corsa
4. Vauxhall Astra
5. Peugeot 207
6. Mini
7. Volkswagen Golf
8. Ford Mondeo
9. Vauxhall Insignia
10.BMW 3 Series

AA president Edmund King said; "It is encouraging that approximately 15,000 orders each week are being made via the scrappage scheme.

"This incentive is helping sales but also promotes safer, more fuel-efficient motoring as many people are cashing in bigger gas- guzzlers for small, cleaner, greener, safer machines. We have proved the cynics wrong as this scheme is working."

RAC motoring strategist Adrian Tink said: "The fact that the decline in new car sales seems to be slowing is a definite boost for car manufacturers and shows the scrappage scheme is achieving its short-term aim of providing an economic stimulus for the car industry. However, it is still early days.

"There are some great deals out there for consumers to take advantage of and the good news is that they are buying smaller and more fuel-efficient cars, which can only be good news for the environment.

"Having said that, it's really disappointing to see that some manufacturers have recently raised their prices at a time when many motorists are facing financial uncertainty."

Tony Woodley, joint leader of Unite, said: "The scrappage scheme is showing that the sales tide can be turned. But its promise is in danger of being extinguished if the banks continue to choke off cash to consumers who want to support British skills by buying British-built vehicles. We need to see the tight strings on loans being cut and cut fast.

"Bailed out banks who chose to line the pockets of their executives instead of supporting jobs will not be forgiven by the public."

Lord Mandelson today made clear there was no prospect of the car scrappage scheme being extended beyond its scheduled end date of February 28 next year or when the £300 million funding runs out, whichever is the soonest.

The Business Secretary told Sky News: "We must allow the scheme to take its course but then it will be back to normal.

"It is a one-off and anyone who wants to argue that will have to take on the Chancellor of the Exchequer."

Lord Mandelson said the scheme had "given a shot in the arm to the car industry" and helped support businesses and jobs.