A solar lease is a long-term contract that can be difficult to evaluate the true costs, so it is important to read the fine print and compare it to buying the solar panels outright, even with a home equity loan or a special solar loan.
The simplest method to evaluate a solar lease or Power Purchase Agreement (PPA) is if your monthly lease payment PLUS your new electricity bills are cheaper than your current electricity costs, it makes common sense to consider. Most solar lease contracts do not require any upfront cost.
However, with a solar lease, you could end up paying double the cost when compared to buying the solar panel system outright. Add up the total amount of the lease payments for the term of the lease and compare that expense to the price tag for buying solar panels. You should think about this because most people do not want to pay more than they have to. Prices for home solar kits have significantly dropped, so you can now get started for under $3,000.
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A solar lease is unlike a car lease because solar panels last 25 years or more. Plus, the solar system is attached to your roof, so you can not trade in every few years. The leasing company owns the equipment, and you pay a monthly fee for the usage. A solar lease differs from a solar power purchase agreement in that you are paying for the equipment, not just paying for the energy that the equipment produces. Also, a residential solar PPA will often have a fixed monthly cost for the life of the agreement while the lease will usually increase over time; although at a set amount, and probably less than electricity costs will.
How to get a solar lease
Solar leases are available in about 12 states; California, Arizona, Colorado, Connecticut, New Jersey, Hawaii, Delaware, Maryland, Virginia, Ohio, Michigan, Pennsylvania, Washington DC.
You can get a solar lease through one of our solar installation experts. We have reviews for many of the solar lease companies, and you should also compare a solar lease vs. solar loan.
What is a solar lease?
A solar lease is a long term financial contract for solar power equipment or the energy produced by a home solar system. Someone else owns the system, and you pay a monthly power fee that is typically 10% less than your monthly cost for utility power. Instead of making an upfront investment in solar panels, you can get started with a 0 or very low down payment depending on your credit record. If your monthly lease costs plus ongoing utility costs are cheaper than your current electricity costs, it seems simple and easy on the surface. You will be able to start saving money from the first day the solar panels are installed.
How is a solar lease different from a solar power purchase agreement?
A solar lease differs from a solar power purchase agreement in that you are paying for the equipment, not just paying for the energy that the equipment produces. Also, a residential solar PPA will often have a fixed monthly cost for the life of the agreement. In contrast, a lease will usually increase over time (although at a set amount, and probably less than electricity costs will; historically, utility rates have increased over 5% each year.) However, all in all, they are very similar.
Who handles repairs?
Since solar panels have very few moving parts and are designed to last for 30 years or longer, they don’t often need maintenance. If something does come up, the company leasing you the solar panels will take care of it. They will also guarantee that your solar panels will perform at a certain level, based on your local climate. It is unlikely that your solar panels would under-perform, but if they do, the leasing company will make any necessary replacements or pay you the difference.
What happens at the end of the lease?
Solar leases typically last 10, 15, or 20 years. When the lease term is over, you will have the option to start a new lease and upgrade to new technology, if preferred. You can also extend your lease or ask your leasing company to remove the system. If you sell the home and move before your lease is over, the new owner will have to agree to and qualify for a new lease. So avoid long-term solar lease contracts if you want maximum flexibility and savings.
When does it make more sense to own your solar panels?
If you plan to stay in your home for more than five years and can get a traditional loan or afford the up-front cost of solar panels, it makes more financial sense to buy them yourself because you will save more money. You will be able to claim the rebates and other government financial incentives that a solar leasing company would otherwise take. Once your system is paid off, you will be getting free power for 25 years or more. You will also be able to sell renewable energy credits and potentially earn money by selling power back to the utility. With a lease, you’d keep making payments for years, but still wouldn’t own the system at the end of that time. You will be locked into a long-term contract. If you sell your house and for some reason the new owner doesn’t want the lease, you will have to pay a balloon payment penalty to get out of the contract.
Contact our solar specialists for a home solar evaluation to learn more about a Solar Lease