In recent years, many solar companies have shifted their focus to leasing solar photovoltaic systems and it has become increasingly popular for consumers. In fact, more than half of all new residential solar installations were financed and owned by a third party in 2012, and many industry experts expect this number to increase in 2013. As a result of its popularity, marketers are spending their budgets promoting solar leases and the market has been flooded with “Zero Down” advertising and sometimes confusing claims.
Once someone has made the decision to investigate solar, they come to us with many questions, and are especially interested in understanding about solar leasing. They want to understand how leasing works and figure out if it makes sense for them. Since so many people have been confused by the mixed messages in the media, we decided to discuss the pros and cons of leasing a system in hopes that the choice to lease or buy will become more clear.
First, let’s go over the basics of a solar lease. A solar lease allows you to rent a solar system from a leasor by paying monthly payments for a certain amount of time. Typically, most lease agreements are for terms of 20 years. Once the lease term is up, one may have the option of renewing the lease, removing the system or purchasing it at fair market value.
The biggest incentive for leasing is that your monthly payment may be less than the amount you previously paid to the utility company, resulting in immediate savings the moment your system is turned on. Additionally, you will continue to realize savings throughout the entire lease term as electricity rates continue to rise and your home benefits from solar energy instead.
Another pro is that the lease provider will take care of the maintenance for twenty years because they are the owner of the solar system. On the other hand, since you are not the owner, you will not receive any rebates, incentives and RECs (renewable energy certificates) associated with your solar system. Instead, they will go to the lease provider.
At the end of a twenty year lease, the final cost of the system for the user is about 2-3 times more than the cost it would require to install and maintain your own solar panels. This is what makes the leasing process so lucrative for providers and explains why so many companies are happy to finance your solar with a lease product.
That said, leasing companies guarantee the solar panel performance for the entire lease term, so you can rest assured that you will be powering your home with solar energy for the next 20 years with no maintenance or repair costs. Also, they usually keep track of production by installing an online monitoring system. If you are a tech geek, you will enjoy checking in online to see how much energy the solar panels produce.
One of the biggest disadvantages of leasing a solar system is that it will complicate and perhaps halt the future sale of your home. If you resell your home before the lease term is over, you must either convince the soon-to-be owner to take over the solar lease (and hope that they will qualify the credit review) or pay off the lease yourself before selling (and hope that there is no penalty for pre-payment).
In summary, leasing is a good way to go solar if improving your immediate cash flow is your goal or simply going green is paramount. If you want a better investment value, then purchasing the system will provide the best results, especially if cash flow is not the primary objective.