There were 245,446 units registered to fleet and business last month, compared to 288,618 units during March 2017, equating to a market share of nearly 52%.
According to the SMMT, "political uncertainty and confusion over air quality plans" has continued to affect consumer confidence, which it claims has contributed to the declining sales figures.
The figures from the Society of Motor Manufacturers and Traders (SMMT) follow a record breaking March 2017.
To put this into context, March 2017 was a record month for new vehicle numbers ahead of changes to VED rates, and a decline in 2018 had always been expected, although not by this much.
Weakening consumer confidence in the wake of the 2016 Brexit vote has also been blamed by the industry body and some dealership bosses for faltering registrations in Britain over the last 12 months after record highs in 2015 and 2016.
Overall, demand for petrol and alternatively fuelled vehicles (AFVs) rose 1% and 5.7% respectively in March, but they failed to offset a massive 37.2% fall in diesel, which now accounts for 32.4% of the market.
"Consumer and business confidence, however, has taken a knock in recent months and a thriving new vehicle market is essential to the overall health of our economy". Although the United Kingdom is expected to be the worst-performing new vehicle market in Europe in 2018, it remains the second largest and demand is still surprisingly high.
In the first quarter of this year 146,614 of these vehicles hit British roads, an increase of 2.7%, as the inclement weather appeared to lead to a boost in registrations. However, almost 720,000 new high-tech, low-emission cars left forecourts in the first quarter of 2018 as consumers took advantage of competitive offers, meaning last month's market was still the fourth biggest on record. Some 200,000 people are employed in new vehicle retail alone, while UK-based auto finance firms employ over 45,000 more, with an annual £12.5 billion economic contribution. However, demand for alternative fuel vehicles grew by 20 per cent.
Mike Hawes, SMMT chief executive, said: "A decline in the important plate change month of March is a concern and we need the right economic conditions to restore market stability and encourage buyers to invest in new commercial vehicles".
"Consumer and business confidence, however, has taken a knock in recent months and a thriving new vehicle market is essential to the overall health of our economy".
"All technologies, regardless of fuel type, have a role to play in helping improve air quality whilst meeting our climate change targets, so government must do more to encourage consumers to buy new vehicles", he added.