Constant Solar Power

Southern California's Premier Solar Provider Since 2001

Buying versus Leasing

If you have been looking into solar for your home, you likely have noticed by now that the new companies really push the solar lease. In fact, many of the most visible companies are nothing more than marketing and financing businesses! Companies like Sunrun and Sungevity – to name just a few -- do not actually build solar systems. Their businesses are devoted to marketing and financial leveraging.

Because the returns on an investment in a residential PV system are so high, these companies are more than happy to take the returns themselves and lease you the solar panels. A quick review of the graph below shows how much money your solar power system will earn you after it has already paid for itself.

If you lease the system, there are no up-front costs and you would start saving a few dollars per year right from the start. However, the monthly lease payment is taking up a big chunk of the savings limiting your actual savings.

The leased system will generate roughly $4,000 total savings over the 15 year lease term. Over that same period, the owned system would have paid for itself, plus earned you more than $5,000 additional. By the end of the 25 year warranty period of the solar panels, you would save nearly $25,000 above and beyond the initial cost of system.

Most solar leases are offered for a 15-year term. It is no coincidence that is the time when the real returns start kicking in.

The leasing companies know that energy costs continue to skyrocket, and many believe the PV solar panels will actually appreciate over time. Consider this: Say your electric bill is presently $100 per month. If energy prices continue to climb at present rates, you may be looking at a monthly utility bill of nearly $300 per month after 15 years. Now, all of a sudden your lease is up…. You can be sure the finance company will be ready to extend your lease at much higher rates, or allow you to buy the system at "Fair Market Value." And because energy costs are much higher, it is a pretty good bet that the Fair Market Value of the system will also be higher.

Another thing to consider when choosing between a lease or purchase is the value and marketability of your home. When you buy your solar system outright, the value of your home increases and extensive market research shows that homes that have owned PV systems sell faster than other homes.

And, what if you lease? If you leased the solar system, instead of having a valuable asset, your leased PV system is a liability that the new homeowners have to take on. Being encumbered by a lease will complicate the closing process at best, and at worst it could be a deal breaker.

So, is leasing a solar system ever a good choice? Yes, but only in very specific situations. The most common would be a lease for a non-profit entity. Non-profits do not pay income tax, and therefore they can not benefit from the federal investment tax credits for solar. In these situations, a lease is often used and the lease company can take the tax credits in lieu of the customer.