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Home solar lease pros & cons

By James Kennedy, Founder and President Beach Cities Solar Consulting LLC

What’s a home solar lease?
Solar leases are fairly similar to car leases in that they are a form of third-party ownership (TPO). Under a solar lease, this third-party owner (e.g., solar company) installs solar panels on your property and then sells you the electricity produced at a predetermined monthly rate. Companies calculate this rate based on the estimated annual production of your solar system and include this rate in your contract. Your lease will also have a fixed term length, which will typically range from 20 to 25 years. At this point, you can choose to either purchase your system outright at the market value price, remove your system, or renew your contract (typically one to 10 years) and continue monthly payments. Another important thing to look out for in a solar lease is an annual escalator; this will increase your monthly payment by a preset rate over your term length (typically one to five percent each year).

 

Solar leases were made popular by SolarCity
SolarCity was notorious for pushing solar leases in the early years of our industry
Will a solar lease save you money?
Generally, a solar lease will help you save between 10 and 30 percent on electricity costs over its lifetime, but these savings would be twice as much if you financed your home solar system and three times as much if you purchased it outright.  This is the fundamental reason BCSC only recommends purchasing your solar system!  Another reason we recommend purchasing your solar system, is because the incentives, such as the 26% federal investment tax credit (ITC), will go straight to the owner of the system (and not the lessee). If you choose to purchase your solar system instead of leasing it, you’ll be able to take advantage of all available incentives.

What are the benefits of a solar lease?
The lack of upfront costs is often the biggest initial draw of a solar lease–but this can also be accomplished with a zero-down solar loan. So why would you want to enter into a solar lease if it will save you less long-term? The solar company will tell you, with a solar lease, there won’t be any surprise costs! Because you’re not the owner of the system, you won’t have to worry about any upkeep or maintenance costs that may arise over the system’s lifetime. The third-party owner will monitor your system to make sure its performance is in line with your contract, and if anything is amiss, they’ll be responsible for fixing it. However, solar systems are generally very low maintenance, so, it’s highly unlikely that these costs would exceed the additional savings you’d get from owning your system.

What happens if you want to sell your home?
This is one of the most important considerations you should make before entering into a solar lease contract. If you own your own solar system, you’ll likely see a three to four percent increase on the value of your home and it will likely make your home more attractive to potential buyers. However, solar leases can often have the opposite effect. If you choose to sell your home during the solar lease term, you’ll need to either buy out the lease from the third-party owner–which will often cost substantially more than if you had purchased the system initially–or you’ll need to transfer the lease to the new homebuyers.  Some home buyers won’t want to take over your lease, which can make selling your home very difficult.  We have seen this happen on numerous occasions, always to the surprise of the homeowner!
 Contact Us!
We strongly recommend you contact us prior to entering into a solar lease!  Get your turnkey home solar system and battery proposal with ROI and financing options by e-mailing us your most recent electric bill, a picture of the electrical panel, and a picture of your roof today: info@beachcitiessolarconsulting.com