The figures showed that 248 motor traders failed last year, compared to 319 in 2006.

The impression of a positive outlook could be deceptive, however.

Kirk Fletcher, managing director of Experian's Automotive division said: “The annual figures may indicate an optimistic end to the year, but this is far from the case and the final quarter gives a truer picture. “The fact that the declining rate of business failure dropped off markedly as the year progressed – to virtually nothing by the final quarter of the year – suggests that 2008 could see the failure rate rise again.” Fletcher pointed out that, despite the motor trade being recorded as ninth highest for improvement of 34 sectors analysed last year, it was still among the highest in terms of the number of insolvencies in any sector.

“Businesses are feeling the effects of interest rate rises and the squeeze on borrowing conditions and these figures make the real picture,” he continued. According to Fletcher, trading conditions continue to be tough and many small dealers are struggling. The downturn in insolvencies last year could simply be highlighting the increasing trend of larger dealers swallowing smaller ones struggling to remain in business, he said.