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How Does a Solar Lease Work? Here's How to Get The Best Deal For Your Money.

Leasing solar is one of the best ways to get solar on your house for no money down. But you’re probably asking yourself, “how does a solar lease work?”. In this post we’ll talk about solar leases, leasing vs buying and the costs and benefits of leasing solar.

How Does a Solar Lease Work

Solar power is now an affordable option for most homeowners. And today there's several developers and manufacturers who offer solar panels, solar roofs, and other products to help you offset your power bill in eco-friendly ways. However, SunPower panels have the highest efficiency and longest warranty so they’re the best choice for most homeowners (biased view?...).

Because buying solar panels outright may not be an option for many people, there's a few financing options to help you make the jump. One of those options is the solar lease. And if you want to learn how a solar lease works, then you’re in the right place.

Basics of The Solar Lease

A solar lease is just what it sounds like. Rather than buying the equipment and paying for the installation, you sign a lease agreement with the provider. You agree to make monthly payments and the operator installs the panels and retains ownership.

This route requires zero money out of pocket in most cases and offers fixed monthly billing that’s significantly less than your current utility bill. This is ideal because you can easily work the bill into your budget and you don't have to wonder what you're going to be charged each month.

The advantage of a solar lease is that it saves you money up front and on your bill each month. Essentially, you can spread out the cost of the panels and installation over the lifetime of the lease. Typical leases least 15 or 20 years.

On the other hand, you don't get actual ownership of the panels so you can’t claim the 30% credit on your taxes. Leases can be done in one of two ways. The company that controls the lease might have a local partner or installer that will handle the installation and upkeep on their behalf. Or it might just be one company that handles both the installation and the lease. Both of these arrangements tend to work out about the same for you and they mostly vary by location and availability of local contractors. At SunPower by the solar quote, we handle everything for you and we’re backed by SunPower which has been in business for decades.

Leasing or Buying

It can be tough to decide whether to lease or to buy a solar panels. What’s good about a lease is that it breaks up the cost over several years and it won't affect your credit the way a loan would.

However, you should think carefully about whether a lease makes sense for your budget and your future plans. For example, the average buyer spends about seven years in a house before moving. A solar lease contract lasts significantly longer than that, and you don't want to pay for panels after you have moved to a different house. However, it's typically not hard to sell a house with leased panels.

Also, most leases include all upkeep and maintenance costs. Also, you don't need to pay extra for breakdowns or problems and the company can fix issues as well as make sure the panels are aligned properly.

On the other hand, buying panels outright can add 15 - 25K on average to the value of your home. And the future homeowner won’t need to take over the lease. However, you’re responsible for maintenance and upkeep of the panels (which is admittedly minimal). The down side is that buying and installing panels yourself can cost in the tens of thousands of dollars which will need to be paid upfront. If you don’t have the means to lay out the upfront cost, leasing is the best option and easiest way to reduce your energy bills.

Costs and Benefits

Like any other contract, a solar lease is binding. For that reason, you have to perform your due diligence and learn as much as you can about the process and the local market first.

For example, many states and some towns offer subsidies of various kinds for people who want to go solar. How does it work for your local government? Would that benefit you or would it all go to the company doing the installing? Asking these questions can help you wrap your head around the benefits before signing.

Try comparing a potential lease term to the cost of a loan from a local bank to help cover the cost of purchasing instead. You should also read the contract carefully and see if there are any fees and charges you need to know about. Since solar power itself is a growing field, there are many companies all providing slightly different service. The first lease contract you find may very well not be a good fit. If something like that happens, then you need to be ready to move on and consider other options.

Buying Vs Leasing Solar Panels Comparison

There's a few, notable differences between buying and leasing solar panels that you may want to compare side by side. With that said, here's a breakdown:

Installation Costs:

Solar Lease:

  • Often $0 out of pocket which means you can save on electricity without investing any money.

  • No 30% tax credit because you don't own the system.

Solar Loan/Purchase

  • Often $15,000 or more in upfront costs.

  • You qualify for the 30% tax credit because you own the system.

  • Often times you can get rebates that reduce the purchase price by up to 50%.

Maintenance Costs:

Solar Lease:

  • Maintenance is handled by the leasing company. If anything goes wrong, they cover the cost of repairs.

  • You get a free app to track your power usage.

Solar Loan/Purchase:

  • You're responsible for maintaining the system and any repairs that need to be made. However, its important to note that solar panels are extremely durable and don't have moving parts so repairs are rare.

  • May not include the power usage tracking app.

Contract Terms:

Solar Lease:

  • Leases are often 20-25 years long. If you sell your home, the new homeowner will need to take over payments.

Solar Loan/Purchase:

  • Loans can vary depending on your credit score and income. However, they typically last 10-20 years. You own the panels so it adds approximately $15,000-$20,000 to the value of your home.

Return on Investment:

Solar Lease

  • Often you get into a lease with $0 invested and start to see savings of around 10-30% immediately. And the costs don't go up so your savings grow as the utility companies increase their rates each year.

Solar Loan/Purchase:

  • You'll save between 40-70% on electricity over the life of your solar panels. However, it will take several years before the savings have equaled the money you laid out to purchase the panels in the first place. Once its caught up though, you get free electricity for the life of your panels.

Final Words

Solar power hasn't hit the mainstream yet, but the growth is rapid. More and more people are catching on the the fact that solar power is less money and good for the environment. Panels are stronger and more efficient than they’ve ever been and SunPower panels actually look nice on your roof.

If you’re wondering how a solar lease works and debating leasing vs buying, you can rest assured that both are viable options. A lease is a longer contract with no money out of pocket and a fixed bill. Purchasing is all upfront and then little to no money out of pocket moving forward. For a free, no pressure quote, click here or give us a call now.



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