IRVINE, Calif.  — January new-vehicle sales will decline 3% year-over-year to 1.13 million units sold, Kelley Blue Book said this week. If realized, the prediction puts the seasonally adjusted annual rate at 17.4 million.

“After a record December capped a new record year of vehicles sales in 2016, January figures appear to be enduring a hangover effect, potentially falling more than half a million units from the previous month,” said Alec Gutierrez, senior analyst for Kelley Blue Book. “However, January is typically the weakest month of the year for sales, as winter weather sets in and consumers recover from big spending over the holiday season. In addition, many potential sales were likely pulled ahead into December as consumers opted to take advantage of the ample inventory and incentives available industry-wide.”

Incentive spending is a concern as it continues to rise across the industry, the firm, and another record in 2017 would likely require undisciplined sales tactics driven by incentives, leasing and longer loan terms. Kelley Blue Book’s 2017 forecast calls for sales in the range of 16.8 to 17.3 million units, which would represent a 1% to 4% decrease from 2016.

Retail sales, according to the firm, are expected to account for 79.2% of volume in January, down from 79.9% in January 2016.

The firm also noted that the Volkswagen Group is expected to report large year-over-year gains in sales this month, as the German automaker looks to put the diesel scandal in the past.

“With multiple new products on the market and looking to put the diesel scandal in the past, Volkswagen Group should report large year-over-year increases, and start to gain back market share,” said Gutierrez. “While new cars like the Volkswagen Golf Alltrack and redesigned Audi A4 are contributing to the automaker’s growth this month, SUVs like the Tiguan and upcoming Atlas will have to become bigger players to help Volkswagen transition its sales mix toward the growing consumer preference for utilities.”

American Honda also should do well in January, with sales expected to grow 5%. The manufacturer’s lineup of SUVs will be primarily responsible for the gains, the firm noting that Honda SUV sales could increase 20% behind the redesigned CR-V and smaller HR-V.

Quietly growing in the second half of 2016, mid-size SUVs/crossovers look to be the second highest volume segment in January 2017, buoyed largely by strong demand for utilities. Consumers who may have previously considered a large sedan or minivan are instead buying mid-size utilities for roughly the same price.

Compact SUV/crossover, the top segment in the industry, is expected to decline slightly in January, but should still grow its share of overall sales. In 2017, the Toyota RAV4 and Honda CR-V could unseat the Toyota Camry and Honda Civic as highest-selling vehicles in the industry, pickups excluded.

There are 24 sales days in both January 2017 and January 2016.  All percentages are based on raw volume, not daily selling rate.