Demand for new cars rose by 1.2% last month, figures show.
Some 163,898 new cars were registered in July compared with 161,997 during the same month in 2017, the Society of Motor Manufacturers and Traders (SMMT) said.
Registrations are down 5.5% this year compared with the first seven months of last year.
The SMMT said this is "broadly in line with expectations as demand begins to level out".
Sales of petrol models increased by 20.1% last month, while diesels fell for the 16th consecutive month, down 24.4%.
Demand for alternatively fuelled vehicles such as hybrids and pure electrics increased by 21% to take a market share of 6.5%.
SMMT chief executive Mike Hawes said: "The feel-good factor from a sun and sport-packed July, combined with some fantastic deals on a raft of exciting new models, clearly helped keep showrooms relatively busy last month.
"It's great to see alternatively fuelled vehicles benefiting from this growth, and Government's acknowledgement of the vital role new-tech diesel will play in its Road to Zero strategy should help even more motorists benefit from the latest, safest and low emission technology over the coming months."