Solar Lease vs Buy: Free Installation Lease Is Just A Myth


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Graph - Average Cost of Electricity

The solar industry boom in recent years is due to three main factors

  1. Electricity rates are rising in many cities and states.
  2. The cost of solar equipment has dropped 50 percent or more since 2008.
  3. Solar leases and PPA financing is more prevalent.

If you live in California or other solar ready states, you have heard about a “solar lease” and many times the advertising promises, “free solar installation”. The offer sounds good but of course the promise of anything free should raise red flags for any consumer.

In fact, free solar installation is a myth and here are the reasons why:

  1. Solar leases agreements mean you forfeit the 30 percent solar tax credit and any local rebates. $0 down sounds good, but it is important to look at the fine print. Realize that when you sign a PPA or solar lease, you don’t own the actual equipment, the lease company and its investors own the equipment, so you aren’t entitled to these credits.What is the value of a 30 percent tax credit? In California, the average system size is a 5.0 kW system. The tax credit amount averages between $4,000 and $6,000 for most homeowners that qualify for the tax credit. That is not Free installation.
  2. Solar lease monitoring, maintenance and insurance are not free. The reality is that solar power systems rarely have any need for maintenance or repair. The money the lease takes from your tax credit and monthly payments adds up to tens of thousands of dollars more than will ever be needed to install, monitor or repair a solar system. Out of the box monitoring and inverter replacements might add up to a few thousand dollars total. With solar leases, this actually costs a premium from home owners, costs that are simply pocketed by the company holding the lease.It is far more important to choose a contractor with longevity who gives you confidence that the company will be in business to honor a warranty of service issues.
  3. Solar leases have 20-year terms with built-in escalators and no pre-payment options. Remember that after your so-called free installation, you now have 20 years of monthly payments to make. The lease amounts to your new utility company. Solar leases are firm contracts. They require monthly payments, don’t have any pre-payment options and include escalators that increase your monthly payments year after year. As time goes by, the actual numbers and costs are relaized, leases end up costing the homeowner two to three times more than simply purchasing the system, with no way to economically get out of the contract.

The fact is that as the cost of solar has dropped making solar ownership the best option for most homeowners. If you want to see what the cost of solar would be for your home based on your current electricity bills, use our PowerSaver Estimator to see costs. Converting to solar is an easy process and by locking your electricity rate at 6 cents – 8 cents, you can save thousands over sticking with the utility or solar leases.

Here are some questions to ask solar contractors to help compare solar lease proposals to solar purchase proposals.

  1. Make sure to get multiple bids from multiple contractors.
  2. Get at least one bid for a solar purchase, (not the purchase price from a lease company).
  3. Ask all your contractors to show you in writing the price per watt for their system quotation.
  4. Ask all of your contractors to show you in writing the 30 percent solar tax credit amount and any rebates or other incentives for the quote being proposed.
  5. Investigate other payment options including loans, PACE programs and lines of credit.