The number of new cars registered rose by almost 26pc in the first month of the year.
In a further sign of improving consumer sentiment, some 20,105 new cars and other vehicles were registered in January, a rise of 4,130 over the same month in 2014, figures from the Central Statistics Office (CSO) show.
The Society of the Irish Motor Industry (SIMI) said if the surge in sales continued, up to 2,000 jobs could be created this year.
SIMI Director General Alan Nolan said sales were returning to "normal" levels where between 130,000 and 160,000 vehicles a year were sold as companies re-invested in their fleets and ordinary motorists changed their car.
The most popular brand sold was Toyota, and the vast bulk of cars purchased fell into the lower motor tax bands which are based on emissions generated.
The bulk - 13,990 - fell into the 'A' motor tax band, which attracts the lowest annual payment of between €170 and €200.
It was followed by 5,098 sold in the second-lowest Band 'B' which costs between €270 and €280 a year.
"It does prove that if you put the right buttons in front of people they will press them," Mr Nolan said.
"It is really a win-win situation. The State has developed a system to reward decisions to buy cleaner cars, and it's clear consumers have taken that message on board. Even in the bigger, more expensive cars, people are focusing on the cars which fall into the lower CO2 bands."
Mr Nolan said members reported an increase in consumer demand from late last year, with a return to the market of 'normal' buyers.
"It's a pretty big hike. It was looking good from December, with our members saying consumer interest and footfall was strong. We sold around 96,500 cars last year, strongly up from 74,000 the previous years.
"We would feel this year could finish around 115,000, if the current level of recovery and confidence continues. This would bring us into sight of getting back to a normal year, where somewhere between 130,000 and 160,000 cars are sold.
"Feedback from dealers is the noticeable change is the return of normal consumers to the market. Companies and business have been the mainstay during the difficult recession years."
He said some 4,000 jobs were created in the industry last year, and that if sales growth continues as many as 2,000 positions would be created.
The figures show that Toyota was the best-selling brand in January, followed by Ford, Hyundai and Volkswagen.
Just over 4,000 used and new cars were registered in the month, an increase of almost 1pc on January 2014.
Overall, some 23,152 new vehicles were licensed in January compared with 18,328 during the same month last year, an increase of 26.3pc.
These include 20,105 private cars, 2,050 goods vehicles - an increase of 47.5pc - 197 tractors, and 115 motorcycles.
Some 4,001 second-hand imported cars were also registered, along with 657 imported goods vehicles, 139 used tractors and imported motorcycles.
In all, some 5,166 used cars were imported and registered for the first time.
The most popular engine type is diesel, with 10,141 of new cars using this fuel type, followed by 3,504 petrol engines. Another 236 petrol/electric hybrid cars were sold, along with 68 electric vehicles.
While most buyers 'go green', six cars were registered in the 'G' band, which attracts an eye-watering annual motor tax bill of €2,350.