Businesses have begun cutting back on the number of new fleet vehicles they are acquiring as the economic situation worsens.

Fleet new car registrations dropped by 16.1% last month while business car registrations fell by 37.1%.

Light commercial vehicle registrations were also down by 22.1% last month.

"September is a key month for registrations, but the credit crunch hit the figures,” said Paul Everitt, the Society of Motor Manufacturers and Traders (SMMT) chief executive.

“The summer's spending cut meant a sharp drop in the month's van registrations.”

Fleet new car sales started the year well, but fell away sharply and went into double digit decline in each of the past two months.

Business car volumes have fallen by more than a third in the past three months.

The fall in fleet, business car and LCV sales is a reflection of the worsening economic climate.

With companies cutting back on new vehicle acquisitions, dealers are being particularly hard hit.

This could particularly difficult for small fleets who source their vehicles direct from franchised dealers and rely on them for vehicle maintenance and support.

Several major dealers have already ceased trading and others are expected to follow.

As a result, several British franchised dealerships have already thrown in the towel.

Lookers closed its Bury St Edmunds Jaguar and Land Rover dealership, a Skoda dealer in Bristol has closed, as has a Tonbridge Vauxhall dealership and a Volvo dealer in Telford will shut its doors at the end of the month.

As Stephen Briars editor of the UK motor industry publication, AM, said: “It’s a cheerless prediction, but I fear that we are going to see a lot of dealer failures.”

George Alexander, editor of Glass’s Guide to Used Commercial Vehicles, added: “Franchised dealers are almost uniquely vulnerable to a market downturn.

"They suffer all the disadvantages – such as falling inventory values and fewer customer enquiries – yet are restricted in how they are able to react to such hostile conditions.”

The massive drop in registrations last month is all the more worrying for dealers as September is traditionally a bumper month as company car drivers hold back for the coveted ‘58’ plate change.

September registrations typically account for at least 17% of the annual total, running a close second to the March volume.

However, this September was more than 120,000 units lower than the March figure, falling to its lowest level since the twice-yearly plate change system started in 1999.

Outlook for the last quarter of the year is particularly subdued.

The market has fallen in each of the past five months and in all but two months in 2008.

Since April, the 12 month rolling total has dropped by almost 150,000 units, with September accounting for 60% of this fall.

Diesel volumes also fell, but their market share rose from 39.4% a year ago to 42.8%, as fleets and private buyers continue to opt for more efficient vehicles.

In addition, alternatively-fuelled vehicles saw their market share rise from 0.7% to 0.8% of the market, although their volumes also fell in September to 2,738 units, but were still up 1.5% over the year to date to 13,586 units.

Analysts say it may not be before quarter three next year that the market stabilises.

“New car registrations have fallen for the fifth consecutive month and represent the most difficult economic conditions the industry has faced in 17 years,” said Mr Everitt.