These days solar companies are falling over themselves to make solar accessible to every homeowner. But do the finance schemes being offered benefit you, or do they favor the Wall Street greed?
Homeowners in the United States are curious about the differences between leasing a home solar system and buying one out right. There are advantages and disadvantages to either method. One thing for sure; the stock market loves it when you take on a solar lease, just as much as when you lease a car, or any other large piece of equipment. No surprise here, as this has always been the case with any leasing instrument. But before you go straight to skepticism over a lease, let’s take a look at some of the pros and cons of leasing verses outright purchase of solar.
First of all, how does solar panel leasing work?
When homeowners lease solar systems, they actually buy electricity from a company who owns the solar panels installed on their roof. The price a lessee pays may be significantly lower or the same to what the utility company would charge for electricity. These are called escalation and de-escalation clauses. Some companies like Sungevity and SunRun are third-party financers, and they don’t actually install the solar system. Instead, they contract with local solar integration companies to have the panels installed onto the roof. Others are companies like SolarCity, who actually handle both the financing and installation. Solar leasing terms vary considerably, and they usually allow homeowners to start their solar leasing program with no money down. Leasing contracts are available in increments of twenty, fifteen or ten year contracts, where homeowner’s are given the option to buy the system, if not, fully own the system outright at the end of the lease.
In which states can homeowners find solar leasing programs?
Solar leasing contracts can be found in 13 states: Arizona, California, Colorado, Connecticut, Delaware, Hawaii, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, Oregon and Texas. It’s also available in Washington D.C. However, homeowners need to know that solar leasing is only available in locations in these areas that offer measurable state, local or utility rebates.
Which firms offer contracts?
SunRun, Sungevity and SolarCity are the major solar leasing partners in the United States. Sungevity and SunRun offer leasing, but they contract out to local installers. SolarCity does installation in house.
Four Reasons to Consider a Solar Lease:
Leasing doesn’t come with the same upfront costs that buying does. Most homeowners who consider solar installation are worried about the up front costs. Although terms vary based on one’s credit rating, local or state incentives and the solar capacity of one’s home, solar leasing usually allows people to go solar without putting any money down. This is one way for consumers to access solar energy who otherwise wouldn’t be able to put down the investment capital. And since fewer American homeowners have equity now than in the past, home equity loans that were once easy to obtain aren’t always available to finance solar installations.
Leasing doesn’t come with maintenance costs. When something malfunctions, lessees tied into a lease aren’t responsible. Repairs, maintenance and replacement are the responsibility of the solar leasing company. For example, if a panel underperforms on delivering adequate power supply, or an inverter fails, or comes up for end of life replacement after ten years; it’s the solar lessor who promises and pays under warranty. Considering this costs a few thousand dollars, leasing can provide the financial peace of mind free from maintenance and uncertainty.
Leasing may cost less for energy verses the utility company. Some leases allow consumers to lock in static pricing on electricity rates for a decade or longer.
Leasing allows you some choice in how you design your lease terms. Some leasing products allow you to choose how much money you want to put down toward the lease, as well as the escalation rate.
Five Reasons to Opt for Outright Purchase of Solar:
Buying can be a better economic bet. Solar leasing companies are in business to turn a profit from the leases they sell. They pocket the rebates and incentives, and use escalation and de-escalation options in order to better hone the leasing instrument into a financially rewarding investment for themselves. The longer the lease agreement, the more they profit, and the less economic sense it may make for the consumer. Solar leases aren’t a poorly crafted or unscrupulous device by themselves and if used correctly. The key to staying ahead of the potentially negative consequence of a solar lease is to assess your situation with a level financial analysis. For the cost of a $250 feasibility study, you can hire an energy consultant-solar broker to help you compare the pros and the cons relative to your unique situation. Have them perform the lease verses purchase test, and then decide.
Buying panels provides flexibility. Lease contracts might specify a certain installation size, but when owners purchase their own system, they aren’t bound by details of equipment or power production.
It might be easier to sell your home without a lease. According to some real estate professionals, solar leases may present a potential slowdown or a threat to the sale of a home. Some homebuyers may not want to deal with taking over an existing lease. They may have other ideas for how they want to shop for solar, or they may not have the credit to qualify to take over a solar lease. Alternatively, most would be homeowners who cannot qualify for a solar lease, most certainly will not qualify for a home loan. So, there is some discrepancy on this opinion verses common high credit score correlation to home loans and credit scores.
A solar purchase may add value to a preexisting home. Homeowners who are going to move in the next few years probably shouldn’t consider buying or leasing a solar panel installation. However, if consumers sell their home after they’ve benefited from the installation after several years, the money that they’ve invested may allow them to raise the asking price and compete more effectively against those home sellers who do not have a solar installation.
Some solar leases will not let you pay down or pay off your system early. With more leasing options becoming available, you will be wise to check out the terms and conditions. Some have reportedly 20 year contracts, while others let you pre pay or pay off the system in 7 years.
To buy or not to buy, this begs the question. There are some contradictions between owning verses leasing. In the end it comes down to what each individual consumer deems valuable to himself, both financial and intrinsic.
Some consumers want to emancipate from the grid for environmental reasons, no matter the cost, and within reason. Others have skyrocketing electricity bills with no end in sight, where a lease may be the only access point short of outright purchase, to which funds may not be readily available.
Article written by Jennifer Coleman of Sun Source Solar Energy Brokers, providing solar brokering and solar energy consulting services in Santa Rosa, Marin, Sonoma, Napa, Solano and San Francisco Counties. For more information, please visit www.SunSourceSolarBroker.com.