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How Does Solar Leasing Work

Because it is a new initiative in the industry, many homeowners want to know “does solar leasing work?” While a homeowner can get a photovoltaic system right away with this kind of contract, it isn’t the best choice in the long run. It may seem attractive because the setup can be had for with no money down, and payments can be stretched out over many years. However, the savings are negligible compared to just buying the system outright.  There are also multiple financing options available to the homeowner who wants to purchase the panels, but who needs help to do so.

How does solar leasing work? In short, it is similar to taking out a loan for a house or car. The installer sets the panels up right away and enters into a contract with the homeowner detailing payment terms. In general, the lease term for the panels will be around 15 years.  At the end of the term, the homeowner must sign another contract to keep the panels. Those who choose this option will save around $15 to $20 a month on energy for the lifetime of the contract.

There are many problems with this arrangement, however, and by the time the family realizes what they’ve signed up for, they will be locked into a long-term contract. Does solar leasing work? Not for people who value flexibility. The installer owns the panels, not the homeowner, and this means that if the resident wants to sell the house, he or she will need to pass the contract on to the buyer. If this is not possible, the contract will need to be cancelled at great cost to the homeowner.

The savings secured in this way are miniscule compared to owning the panels. There are multiple tax breaks, rebates, and incentives that can cut the upfront cost of ownership by several thousand dollars. However, when the panels are contracted out to the family, the installer will get these breaks and incentives, leaving the homeowner with little more to show than an extra $15 a month. When the system is purchased, it only takes about four or five years to earn back the investment. Once this is accomplished, the panels are still owned by the family, and they will get to enjoy free power for a few decades until the system requires replacement. This means tens of thousands in savings. If the family needs to move, they can take the panels with them and install them at the new property. There is little maintenance required to keep the panels running, so a homeowner doesn’t need to have an installer oversee the operation of the system.

For those that are on a tight budget, does solar leasing work
? No better than just financing a purchase. There are many institutions that are willing to finance low-rate loans to families looking to buy a PV system, and the homeowner will get all of the breaks and incentives on top of friendly loan terms.

When does solar leasing work
? There really isn’t a situation where this is the superior solution, so buying the system remains the best choice for those that want the full savings and freedom granted with ownership.

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