Are you interested in harnessing renewable energy but not sure how it works?
Whether you choose to purchase or lease solar panels, the final cost will depend on a few factors. If the price of paying cash to purchase is out of reach for you, leasing is an option that keeps renewable energy accessible.
How Does Leasing Solar Panels Work?
Similar to renting a house or a car, solar panel leasing involves financial agreements or commitments where you agree to pay a fixed monthly fee to rent the equipment for your solar energy production. Any solar installation, maintenance, or repairs are built into the monthly payment.
[Related: Solar Panel Maintenance: What You Need to Know]
Leasing vs. Buying Solar Panels
It’s important to evaluate the difference between leasing vs. buying solar panels and the benefits they may offer you.
If you don’t have the cash reserves or aren’t ready to make the financial commitment to buy and own solar panels, leasing is a viable option. When you lease solar panels, you do not own the equipment. It’s similar to leasing a car — your panels don’t become an asset.
However, it’s important to realize that leasing solar panels is typically a 20-year commitment. But that timeframe varies across states and leasing companies.
When you choose to lease rather than purchase solar panels, you’ll still save on your electricity bill. But the overall savings is dependent on how much you’re spending on the lease.
Another aspect of leasing solar panels is the control of your roof. If aesthetics are important to you, make sure to check the final design and system size before signing the agreement. Otherwise, you may end up with more panels than intended, or possibly face the street, changing the outward appearance of your home solar installation or business.
Selling or Buying a House With Leased Solar Panels
Solar panels typically qualify for rebates and incentives. While this is an attractive benefit, prospective buyers are turned off when they find out the solar panels are wrapped up in a lease agreement — especially since these agreements may be for 20 years.
Depending on the agreement, the panels may be difficult or impossible to remove, and may not be easily transferable to the new owners.
All in all, leased solar panels add another layer of complications to a real estate transaction.
If you’re a prospective buyer of a home with leased solar panels, be sure to evaluate the terms and conditions of the agreement. Ask questions such as:
- Is the agreement transferable?
- Can I outright buy the equipment?
- What’s the process of removing the solar panels if I don’t plan on using them?
[Related: Do Solar Panels Increase Home Resale Price?]
Removing Leased Solar Panels
When it comes time to sell your home that’s wrapped up in a solar panel lease agreement, things can get tricky. For starters, you may not have the option to transfer your current panels to your new home. Additionally, you may have hesitant buyers who insist that the panels be removed.
You’ll have to speak to your company about specific options on removing the leased panels. Or, there might be a buyout option, which is likely close to $20,000.
What’s more, taking them down on your own can be dangerous and result in heavy fees from the company that you’re leasing from. After all, they receive the tax credits and incentives you missed out on by leasing. They count on your solar panels to stay up and running.
How Much Is It to Lease Solar Panels? Solar Panel Lease Cost
Most solar panel leases are 20 years, and you shouldn’t count on the rate remaining the same year after year. In fact, typical lease agreements allow for a payment increase of 3.9% per year for 15 years.
Over time, the cost of leasing may exceed what your electricity bill would be without solar panels. Your choice to lease is more about choosing green energy rather than your return on investment.
[Related: How Much Do Solar Panels Cost?]
Who Should Lease Solar Panels?
So, should you lease your solar panels? Leasing is a good decision if you want to use renewable energy without providing a huge financial investment upfront.
You should also consider leasing if you’re intimidated by maintaining or repairing your solar panels. That alone can require even more investment, knowledge and a solar panel service and maintenance department with experience.
Depending on the situation, you may not even qualify for solar panel tax incentives. In that case, it may be worth leasing instead of making a large financial commitment to something that isn’t going to benefit you tax-wise.
[Related: How Does the Solar Tax Credit Work? The Ultimate Guide]
Leasing Solar Panels: Pros and Cons
Pros of Leasing Solar Panels
The barrier to entry is low when it comes to leasing solar panels. Not only are there little to no upfront costs (such as a down payment), but you are also not responsible for the solar repair or maintenance and upkeep of the panels. This can add an average of $400 to your annual maintenance budget.
To boost the financial benefits of leasing, solar panels also lower your electricity bill. This leads to savings in extreme climates that require the A/C to run all summer long, or the heater to warm your home during the long winters.
Lease agreements also include a power production guarantee. This means that your monthly lease payments are reduced if your panels don’t generate as much energy as previously predicted.
Beyond the financial benefits, leasing solar panels makes it easy and possible to use more green energy while also eliminating pollution.
[Related: The Benefits of Solar Power]
Cons of Leasing Solar Panels
While there are several financial benefits to leasing, there are long-term financial implications associated with it as well.
First, you don’t own the solar panel system. Therefore, it is not an asset, nor does it add tangible value to your property. There is no way to calculate a return on investment with this option.
Additionally, you cannot claim tax incentives on equipment you do not own. The leasor claims those.
One of the big benefits of buying solar panels is no monthly payment. This is something to consider if you want to reduce your electricity bill without increasing your monthly subscription payments. A lease agreement is essentially swapping your electricity bill for the monthly payment.
If you are considering solar panels for financial benefits alone, it may be worth exploring a solar system purchase instead.
Another con of leasing solar panels is the loss of control over your roof. These companies want to maximize their investment in your property, so their regard for curb appeal, the number of panels, and general appearance are low.
[Related: What to Expect: Your HOA and Solar Panels]
Contact Freedom Solar Power to Start Your Solar Power Journey
Solar panel company Freedom Solar does not offer leasing options for solar panels, but we’ll work with you to purchase a SunPower system from us. We’ll help by creating a finance plan that works best with your budget without demanding any money outright. We also have a 0% interest rate and a 25-year warranty plan to make solar panel ownership well worth your investment.
Inquire today by calling +1 (800) 504-2337 or complete our consultation form and one of our solar specialists will be in touch!
Featured image via Unsplash