Kia To Encourage Leasing Of Its Electric Vehicles In Order To Stay Competitive

Kia confirmed it plans to encourage people interested in its electric vehicles (EVs) to consider leasing instead of purchasing. Why is Kia doing this? It is a way for Kia to effectively offer customers a $7,500 discount on the vehicle (by applying the US federal tax incentive toward lowering the monthly lease payment). It is intended to help Kia’s vehicles be more price competitive with EVs that are eligible for the tax credit as a purchase.

This is undoubtedly an approach that other brands will use, if they also recently lost eligibility for the US federal tax incentive for their electric vehicles due to eligibility changes the Inflation Reduction Act (IRA) introduced last August. It takes car makers years to move vehicle and component production and or to change sourcing of materials around, both of which are necessary for car makers to retain federal tax credit eligibility for their vehicles. This negotiated solution allows leased EVs, which do not otherwise meet the eligibility requirements for the federal tax incentive, to be eligible for it, though the credit goes to the manufacturer who is then supposed to pass along the credit in the form of lower monthly lease payments. According to carscoops.com, Kia believes that this strategy may help increase the current leasing take rate of about 15% of their total EV sales to more like 30 - 40%. Personally, I have no doubt it will help increase EV sales for Kia, and I wonder if their numbers may be a bit pessimistic.

I say that for one simple reason: without this $7,500 incentive, Kia’s vehicles are greatly overpriced compared to competitors. While it is true Kia’s have features that most other brands do not have (like 800V charging capability) and those help Kia stay relevant to shoppers, it is already proving to be increasingly difficult for Kia to move its EVs in the face of price cuts from the likes of Tesla and their lack of eligibility for the $7,500 incentive. It is not an exaggeration to say that Kia’s EV sales seem to be tanking, compared to the first 3 quarters of last year, at least. So leasing makes sense for many would-be Kia EV buyers. Thankfully, the US government, after its sweeping changes to the federal tax incentive, is on board with this. Not only does this leasing option help manufacturers continue to meet EV sales goals during transitional spans of time when they are trying to relocate production and sourcing of materials, it should make EVs more affordable for a broader swath of the driving public because as those lease terms expire, a greater number of EVs become available on the used market as the IRA also includes a $4,000 incentive for qualified buyers who buy used EVs that cost $25,000 or less. That should go a long way toward helping buyers with smaller car buying budgets get into EVs.

But there is another thing that this leasing strategy might also do: it may specifically steer more car shoppers who are ineligible for the tax incentive for purchase to consider leasing a Kia. These people might make too much money, might not pay enough in taxes to receive much if any benefit for purchasing an EV or may not have the means to afford the full monthly payment of a purchase without the benefit applied at point of sale (something that will happen, eventually). In other words, focusing on leases is also going to expand Kia’s market base.

Have Kia’s leasing plans got you thinking about Kia EVs again (if you may have written them off due to price)? Would you be more inclined to lease a Kia after reading this news? Please leave your comments and questions below.

Images courtesy of Kia.

Justin Hart has owned and driven electric vehicles for over 15 years, including a first generation Nissan LEAF, second generation Chevy Volt, Tesla Model 3, an electric bicycle and most recently a Kia Sorento PHEV. He is also an avid SUP rider, poet, photographer and wine lover. He enjoys taking long EV and PHEV road trips to beautiful and serene places with the people he loves. Follow Justin on Twitter for daily KIA EV news coverage.