Should I Lease or Buy my Residential Solar Power System?

Buy Solar Panels

In the early days of solar the vast majority of residential systems were leased. I’m sure that you have seen the ads that proclaim “free solar” or “Solar with no up-front costs”. These are the teasers for a solar lease.

The company offering the lease to the customer retains ownership and charges the customer on a monthly basis a fee that is, in most cases lower that the utility bill that the customer had been receiving. Leases usually have a 20 year term with annual escalator clauses (around 3% per year) and savings to the customer have averaged between 10% and 30%. In past years when the cost of residential solar was high with payback in excess of 10 years, leasing was considered a viable alternative.

If you have a good FICO score, there is a strong argument for purchasing your system outright, even if it means through use of a personal loan to finance some or all of the costs. Some options, such as home equity loans have lower interest rates and the interest may be tax deductible.

Solar Pay off Rate
Data Sourced from EnergySage

Why is this so?

First, the overall cost of residential system has fallen dramatically over the last few years with paybacks averaging 7 years. Since today’s systems are expected to have at least a 25 year life that means you will have 18+ years of “free” electricity, whereas you would still be paying a substantial portion of your electric bill if you leased. These differences are illustrated in the above table which was published in Consumer Reports in June, 2016.
Second, you keep the federal residential tax credit, currently 30%, since you own the system.

Third, you get to decide on which panels and associated equipment goes on your roof. Since the objective of the leasing company is to maximize their profits, they choose the equipment without regard to the efficiency or appearance on your rooftop.
Fourth, it is your roof and you get to decide on the size and location of the solar panels. If you lease, the leasing company essentially owns your roof.
Fifth, solar leases have created problems in home sales. Some lease are non-transferable and need to be bought out for the home sale to close. Even if the lease is transferable, it may cause the buyer to demand a discount to market depending on the monthly cost being assumed and the overall appearance of the system.

Leasing has claimed to have certain advantage over purchase the two most notable being that the leasing company has responsibility for maintenance and they are a “one stop shop”, just sign on the bottom line and the leasing company does the rest.
On the maintenance side, the two major issues here are failure of the equipment and damage to the system as a result of accidental damage. There have been significant improvements in the reliability of equipment and system performance monitoring over the past few years. System problems are now identified instantaneously and in most cases can be fixed remotely by the installer or equipment manufacturer. Should a site visit be required, replacement of defective equipment is covered by the manufacturer’s warranty. Accidental damage can now be covered by your Homeowners insurance.

For one stop shopping, OneClickSolar provides customers with the convenience of designing, ordering and scheduling installation of the equipment they choose, in the location that they decide. Are you ready to cut the cord?

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