Industry experts say the number of new cars sold could reach 220,000 by the end of this year after a year-on-year rise of nearly nine per cent last month, contrary to expectations that the market would begin flattening in the summer.
Scottish sales were also ahead of the UK average, which is forecast to be the highest rise in a decade.
Douglas Robertson, chief executive of the Scottish Motor Trade (SMMT) Association, said: "We are very pleased to see an increase of this size in July.
"Our feeling was the market was starting to stabilise and we had anticipated no more than a five per cent increase this month. We are obviously pleased to have exceeded this and we remain close to 10 per cent up for the first seven months of the year."
New car registrations in Scotland totalled 14,403 last month, an increase of 8.7 per cent on July 2013. Dumfries and Galloway experienced the biggest year-on-year rise, up 17 per cent. The UK as a whole was up 6.6 per cent, with more than 170,000 units sold, the highest figure for July since 2007.
The level of growth led the Society of Motor Manufacturers and Traders to predict the best year overall since 2004, estimating total UK sales will hit 2.45 million by the end of this year.
SMMT chief executive Mike Hawes said: "July saw the new car market extend its record period of growth to a 29th month as confident consumers took advantage of an array of new products and attractive finance deals on the latest fuel-efficient new cars."
However, he said demand in the UK was "beginning to stabilise".
Chris Sutton, managing director at motor finance provider Black Horse, added: "The automotive sector is one of the success stories of the recovery, with another month of increased new car sales, albeit at a more moderate pace than recently witnessed. This is a likely indication growth may stabilise over the forthcoming months."