The emergence of solar leases, in which homeowners agree to pay for the solar electricity generated but not the equipment or labor costs, has propelled the growth of the residential solar market. In fact, solar leases could boost the market to grow from $1.3 billion in 2012 to $5.7 billion in 2016, according to GTM Research. Is it the right choice for you? Keep reading to discover the disadvantages and advantages of both owning and leasing a solar electric system.

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What Is A Solar Lease?
A “Solar Lease” is when someone else owns the solar energy equipment (usually the leasing company) installed at your home to produce your electricity. You pay a monthly payment to lease the equipment for a period (usually 10-15 years). Often the lease payment increases over time. These lease payments may be wholly or partially balanced by lower electric utility bills, through net metering. When the lease payment is less than the utility bill savings from the leased solar electric production, then you are saving money. But this situation can change, and over time lease payments can be more than the utility bill savings, costing you more money. (See the graph above for more information on Cost of Inflation and Solar Cost.)

Solar Lease Advantages: Installing a solar energy system will help lower your utility bills. Those utility savings can help offset lease payments, possibly lowering your overall monthly expenses. The panels, installation and maintenance don’t generally cost you anything, and their performance is guaranteed. Leasing usually makes it easier to upgrade panels, which is good since PV technology is evolving quickly.

Solar Lease Disadvantages – with a lease you do not have ownership of the solar assets. A solar lease is a financial commitment to a long stream of lease payments. For this reason a Lease adds no value to your property (property appreciation), and may actually reduce property value and/or be a hindrance when trying to sell your home.  Make sure you know the details of the lease. The lease companies own the solar panels, so they get the 30% federal tax credit, not you, according to You will not receive on any cash incentives, some as large as $6,000 per kilowatt, handed out by states and utilities. Also, you cannot take advantage of renewable energy credits (RECs), which can be sold to companies to offset carbon emissions.  Another issue is that leased solar panels could complicate selling your house, if the purchaser doesn’t want, or can’t afford, to take on the lease. The seller might have to pay off the lease prior to completing the sale. It is the leasing company that made the “investment”, not you. By signing a lease you become the source of the leasing company’s profits.

What are your solar financing options?

Be Like an Investor, Own Your Power
It is usually more advantageous to treat a solar (PV) energy system as an investment. A solar energy system is an asset. If you lease, then you do not have this asset on your balance sheet (it has not increased your wealth). Rather, a lease is just another expense you pay to use someone else’s asset.

Solar Finance/Ownership Advantages: In most cases you may be more content to own the solar energy system, even if you use a loan to procure the system. When you own the solar energy system it is your investment and utility savings act like dividends; earnings on your investment. In today’s market, solar energy systems can be one of the best long-term investments you can make. Where a lease provides you with solely utility savings, owning solar has more financial benefits. You achieve wealth through property appreciation: a solar electric system is an investment in your home which typically increases your property value. Also, with ownership you may recognize additional profits from carbon credits (SRECs), performance-based incentives and income tax advantages.

Financing Options for Homeowners to Purchase Solar – Homeowners have options when it comes to paying for their solar electric system. GreenSky Finance has a $0 down, solar loan that offers an interest rate as low as 4.99%. Aleo Solar is also offering a 12-year solar loan program, with no money down, low 2.99% interest rate, with low monthly payments.
With either of these financing options will get to retain the 30% federal tax credit and any other financial incentives, your interest is tax deductible, and you’ll own your solar system instead of renting it. The end result is your return on investment with a loan will be far greater than a lease.

Solar is a viable solution for energy, it can significantly increase your property’s value, and reduce your carbon footprint. When considering installing solar on your home, there are financial options for the homeowner to study. It makes sense to understand what advantages and disadvantages exist for leasing or financing to purchase solar. One of the most important factors could be money that is put in your pocket or the leasing company’s pocket.  If you need additional information or have questions we can help you with, please feel free to contact us at PPC Solar can calculate actual system needs and production with a free site analysis or provide a no-strings-attached quote over the phone: 877-736-5896

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