Buying vs. Leasing Solar

24 August of 2011 by

lease vs own Buying vs. Leasing Solar

In the U.S., people interested in going solar are inevitably interested in the difference between buying a home solar system and leasing one as well as in the comparative pros and cons of each.

We’ve addressed solar leasing vs. buying in a number of stories and columns, including a popular article written by an expert in the solar industry.

Given the strong interest in solar leasing and the desire to compare solar leasing to buying we consistently see at SolarChargedDriving.Com and the fact that we haven’t written about solar leasing vs. buying in awhile, we figured it’s good time for a review.

States with
solar leasing
- Arizona
- California
- Colorado
- Connecticut
- Delaware
- Hawaii
- Maryland
- Massachusetts
- New Jersey
- New York
- Pennsylvania
- Oregon
- Texas
- Washington, D.C.

We’ll start with a brief definition of solar leasing, list where leasing is currently being offered, and then list the major companies we know of that offer solar leasing by whom in the U.S. After that, it’s on to a look at Five Reasons to Lease vs. Five Reasons to Buy.

What is solar leasing & how does it work?
With a solar lease, you do not own the solar system on your home. You buy electricity from a company which owns the panels sitting on your roof and usually you buy that electricity at a rate below what you pay your utility for electricity. The solar leasing company can be a so-called third-party financing firm such as SunRun or Sungevity, which do not technically install the solar system but contract with local solar installation companies to put PV on your roof, or it might a company that handles both financing and installation such as SolarCity. While solar leasing terms vary considerably, leases typically allow you to go solar with little to no money down and are based on 15- to 20-year contracts which usually allow you to buy the system at the end of the lease.

Where is solar leasing offered in the U.S.?
Solar leasing is available in select places in the following 14 states: Arizona, California, Colorado, Connecticut, Delaware, Hawaii, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, Oregon, Texas, Washington, D.C. Generally, solar leasing is available only in locations in these 14 states with good local, state and/or utility rebates.

Who offers solar leasing?
The major players in solar leasing in the U.S. are SolarCity, Sungevity and SunRun. SolarCity handles both the leasing and installation of leased systems while Sungevity and SunRun offer leasing but rely on local solar companies to install your solar system.

FIVE REASONS TO LEASE A HOME SOLAR SYSTEM

cd Buying vs. Leasing SolarA solar system goes up in Aurora, Colo.

Leasing saves you the big upfront costs of buying. There’s little doubt that for most people the number one stumbling block to going solar is having to plunk down tens of thousands of dollars up front to buy a system. Though terms vary – in part based on your credit rating, the solar capacity of your home and/or on local, state and/or utility incentives in your area — in many cases, with solar leasing you can go solar with no money down. This is a huge plus for people who don’t have the cash sitting around to put down on a solar system or who don’t want to take out, or cannot take out, a loan to buy a system. (Thanks to the housing crash approximately 25% of American homeowners have no equity in their homes, meaning a home equity loan as a way to finance solar is not possible for this group).

With leasing, you don’t have to pay to maintain the system. Typically, with a lease, you are not responsible for fixing the system if something goes wrong, breaks, or just wears out. In most cases, this includes replacement of the solar inverter, which will have to be replaced somewhere between 10 and 15 years after the system is installed to the tune of several thousand dollars. Not having to worry about the upkeep of the system provides peace of mind for many.

Leasing can save you money over utility produced electricity. While leasing terms vary, if you have the right roof, meaning a sunny, south-facing, un-shaded roof that will produce lots of solar electricity and live in an area with good solar incentives, it’s likely you’ll save money by buying electricity from a solar leasing company as opposed to from your utility. Additionally, some leases allow you to lock in a static electricity rate for 15, or more, years. Meanwhile, electric rates charged by your utility will continue to rise.

Leasing gives you affordable access to electricity independence – without big upfront costs. This reason is similar to No. 1, but with a slight twist. With a solar system on your roof, you have the satisfaction of knowing you’re producing all, or some, of your electricity locally and, although you don’t own the panels, you’re still likely to feel more independent about how you produce your electricity than if you were drawing 100 percent of your electricity from your utility. Plus, if you add an electric car to the mix, you get the satisfaction of knowing you’re partially, or perhaps fully, fueling not only your home with local solar generated electricity but your car as well. And thanks to leasing this all comes without having to plunk down tens of thousands of dollars on your solar system up front.

Leasing allows you to go green – without the big upfront costs. Staring at tens of thousands of dollars in upfront costs is enough to discourage a lot of people from going solar – as the huge popularity of solar leases has shown. Upfront costs stand as a big stumbling block even for some of the greenest greenies who want to say goodbye to Dirty Coal and, if they plan on getting an EV, goodbye to Big Oil as well. Solar leasing allows you to be green while relieving the pressure of coming up with a mountain of upfront green capital in order to go green.

FIVE REASONS TO BUY A SOLAR SYSTEM

bkNew solar panels being unloaded for an installation in Aurora, Colo.

Buying is a better economic bet. Let’s face it, solar leasing companies have to make money, and, even though you’re likely to save by paying leasing companies for your electricity as opposed to forking money over to your utility, leasing companies will still be making money off of you. For instance, they pocket all solar incentives you’d otherwise get if you bought the system. If you buy, you pocket all of the incentives and all of the long-term electricity savings yourself. Of course, as we’ve noted elsewhere, if you need to take out a loan to buy a system, you’ll want to calculate the cost of interest into the total savings picture, and, if you’re inclined to look closely at the total savings picture, you might also want to calculate how much taking out a loan for a solar system will cost you elsewhere – for instance, how it might affect the rate at which you can pay down other debt (mortgage, student loans, car loans, etc.).

Buying is more satisfying. When you buy a solar system, it’s yours. All of the electricity you produce is yours and – if you have the right utility – all that you over-produce is yours as well. This can be a tremendously satisfying feeling. Especially if you’re going to use your home solar system to power 100 percent of your home electric use and tens of thousands of miles per year in an electric car or two.

Buying offers you more flexibility and freedom. You have more freedom in terms of the size system you put on your home’s roof and where you put it when you buy than if you lease. Though if you are dealing with utility rebates, those rebates are typically contingent on all sorts of limits and rules about system efficiency and system capacity.

It might be easier to sell your home with a solar system you’ve bought. Some have suggested that a solar lease could actually be a drag on the sale of a home, though we don’t necessarily agree with this claim. According to this view, potential buyers of your home will be turned off by having to sign on with a solar lease company. If this happens – which, to us, seems unlikely — you can potentially work with your solar leasing company to move the panels to a new home, buy out the lease, etc.

When you buy solar, you make the money on the value solar adds to your home. We definitely wouldn’t recommend leasing or buying a solar system if you think you’re going to be moving within the next five to seven years (or less). But, if you do end up selling your home – ideally, after you’ve benefitted from several years with your PV system, the money you’ve invested in your solar system will repay itself in the price you’re able to ask and the extra money you make will land in your pocket.

Original Article on SolarChargedDriving.com

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