Registrations in Germany increased by 3.7 percent in December as Toyota brand led gains among volume automakers, while the scandal-hit Volkswagen brand's sales fell sharply.
New-car sales rose to 256,533 last month. Full-year registrations were up 4.5 percent to 3.35 million, the highest level since 2009 when deliveries were fueled by state-backed scrapping premium.
"2016 was a strong year for cars. New registrations rose for the third time in a row," Matthias Wissmann, president of the VDA German industry association, said in a statement.
Higher car sales in Europe's biggest market were helped by low fuel prices and low interest rates, a source familiar with the matter told Reuters.
Analysts expect the expansion to grind to a halt this year amid a weakening economy and rising gasoline prices.
"Growth dynamics in the German car market should weaken noticeably in the new year," said Peter Fuss, a senior partner and automotive specialist in Ernst & Young's German practice. "Further growth will be difficult from a sales level that is already high," Fuss said, forecasting deliveries to rise another 2 percent in 2017 on the back of persistent sales incentives.
Incentives in Germany have risen by about a quarter since 2010 and will sustain sales again this year, said Ferdinand Dudenhoeffer, head of the Center of Automotive Research, predicting registrations to be flat this year.
December sales were helped by two additional selling days but were also held back by weakening momentum in commercial registrations
Toyota brand sales jumped by 43 percent last month, according to KBA Federal Motor Transport Authority registrations data. December's winners also included Alfa Romeo with sales up 126 percent, Lexus whose sales leapt 65 percent and Jaguar whose volume was up 57 percent.
VW brand sales were down 16 percent, although VW Group's other brands had a good month with Porsche sales rising 80 percent, Skoda's volume up 25 percent, Seat sales increasing by 13 percent and Audi gaining 11 percent.
Among German brands Mercedes-Benz's volume rose by 7.7 percent, General Motors' Opel marque's sales increased by a modest 1.8 percent and BMW sales were flat.
Download PDF, above right, for December and full-year sales by brand.
French brands did well, with Renault sales up 20 percent and Dacia volume gaining 18 percent. Among PSA Group brands, Citroen sales rose by 11 percent, Peugeot was up 4.9 percent and DS sales plunged 33 percent.
Ford's registrations dropped by 5 percent.
Among Asian brands, Hyundai sales were down 12 percent while sister brand Kia's volume rose by 5.6 percent. Nissan sales dropped by 13 percent.
Reuters contributed to this report