Lease or Purchase? 5 Things to Know

1. Who Owns the Solar Panels

...You, or the leasing company? When you lease solar panels, you are not the owner, and therefore you are not the recipient of the 30% federal tax credit currently offered. 

This also matters because when you lease solar panels, you effectively give a leasing company free reign over your roof. It decides how many solar panels to install and where they should go. The risk, then, is having a large array installed in an aesthetically displeasing spot on your roof. 

The upshot: not having to pay thousands for your own system

The bummer: control over your roof, solar system design, and tax credits is handed over to someone else

2. Who Owns the Energy

Since the leasing company owns the solar panels on your roof, it also owns the power that they generate. This means that, yes, you'll be saving about 10% on your monthly energy bill, but that remaining 80-90% goes straight to the leasing company because it has essentially replaced your energy utility. 

If your system doesn't completely offset the electricity you used, you pay not only the lease for the panels but also the remainder of the electricity bill to the local utility. 

When the leasing company owns the power, they also get to determine an "escalator clause" to simulate the projected rising utility costs of the grid. The danger here, though, is that these added payments (anywhere from 1-5%) may not accurately parallel the rise of energy costs. While your neighbors are only seeing a 2% increase in payments per year, you're stuck with payments increasing 3% each year. Why? Because you're not in charge of the energy produced by your solar panels. 

3. How Savings Compare

Below gives a breakdown of savings from leasing compared to buying (or loaning) your own solar panels. The example depicted is a residential system in New Jersey. A house in California would be expected to demonstrate even more dramatic differences in savings. 

If you don't have the cash to purchase your own system, leasing (for $0 up-front) might be your best option. Something else to consider before leasing, though, are different solar loan options. For sunnier states like California, you can find loan options specific to solar systems that might be just right for you. 

4. If (or when) You Plan To Sell Your Home

Leasing contracts typically come in 15-20 year increments. If you decide within that period to sell your home and/or move to another, keep in mind that whoever is buying your home will have to take on the terms of the lease or you'll have to buy off the lease yourself. 

Sometimes the leasing company will give you the option to move your system over to your new home. This will typically cost you about $1000 all said-and-done to audit and transfer the solar panels. 

The real benefit of owning the system proves itself here because integrated PV (solar) systems have actually been found to increase the selling price of your home or business. In other words, home buyers love to see solar! This is probably because the new owners can move in and immediately begin to see their energy savings (usually 100% offset costs) from their solar panels. 

5. How You Would Plan on Taking Care of Your Solar 

Yes, it's true that if you own the solar panels, it is your responsibility to clean and maintain them. However, a good solar company will, first, use good materials and, second, offer a workmanship warranty. 

A leasing company may or may not offer a "maintenance plan." The catch, though, is that the panels are covered by a warranty, not a maintenance plan. This means a maintenance plan may never actually kick in until your system takes on some serious damage. In the meantime, you'll be paying higher costs for panels that aren't functioning at full efficiency. 

This isn't necessarily avoided by owning your own system, though. If you plan on buying solar panels, it's important to find a solar company who uses materials that are right for your home and who offers a warranty that will have you covered.