Solar Lease Guide: How No-Money-Down Solar Works
Solar Lease Guide: Pros and Cons
Electricity prices are rising for many homeowners, but you don't need a large upfront investment to get the home solar panels that could help reduce your electric bills.
Solar leasing offers a way to reduce your monthly utility bills with zero money down. In this guide, we'll explain how solar leases work, compare them to power purchase agreements (PPAs), and help you decide if leasing is the right path to energy savings for your home.
What is solar leasing?
A solar lease is an agreement between a third-party developer that installs and maintains a solar panel system on the customer’s property and a customer who agrees to make monthly payments for it at a fixed rate for a predetermined period of time.
A solar lease is similar to a solar power purchase agreement (PPA), which might be the only alternative to buying in some states.
How does solar leasing work?
Solar leases begin with designing the solar panel system and entering into a contract agreement before having the panels installed on your property. With a solar lease, homeowners typically receive all of the energy generation produced by the panels, while the solar company owns and maintains the equipment.
Solar lease terms and definitions
| Term | Definition |
|---|---|
| Lease agreement | A lease agreement is the contract you sign together with a solar company outlining the installation details and payment terms and conditions. |
| Lease term length | The lease term length is the amount of time the contract is valid. Most solar leases are locked in for 20 or 25 years. |
| Lease payment | The amount of money you pay the solar company each month for the panels and other system equipment. |
| Price escalator | The amount your monthly lease payments increase after a set period of time. |
Does solar leasing really save you money?
The primary benefit of a solar lease is it can save you money on your electricity expenses. By making a flat monthly payment, you can reduce the amount of utility electricity you buy from the grid. The exact amount of money solar panel leasing can save you depends on the electricity rates in your area and the energy demand on your property.
Pros and cons of leasing solar panels
Solar lease pros
- Lower energy bills: Leased solar panels can reduce your energy cost.
- Worry-free maintenance: The leasing company is responsible for maintenance and service.
- Low upfront costs: You don’t need to purchase the panels.
- Quicker savings: Immediate savings without covering purchase and installation costs first.
- Access to tax credits: Leasing companies can access tax credits that can lower your monthly payment.
Solar lease cons
- Possibly lower overall savings: In some cases, buying panels may yield greater savings.
- You don’t own the panels: No ownership means less control over the solar system.
Is it harder to sell a home with a solar lease?
When selling a home with leased solar panels, you have two options: buying out the system or transferring the lease to the new owner. Buying out the system means you'll own it and can sell it with the house.
Solar lease vs. power purchase agreement (PPA)
A solar PPA is similar to a lease, but instead of paying for the equipment, you pay for the power that equipment produces. Both options allow you to avoid the cost of purchasing panels and make monthly payments.
Will a solar lease work for you?
Leasing solar panels might be a good option if you want to go solar but are concerned about the costs. Leases can help you reduce energy bills quickly and relieve you of the responsibility for maintenance.
Frequently asked questions
What are the downsides of a solar lease?
Some downsides include possibly delivering fewer savings than purchased panels and less flexibility compared to owning.
What happens at the end of a solar lease?
The leasing company will remove the panels or you may have the option to buy them.
How long are typical solar leases?
Leases typically last for 20 to 25 years.