Frequently we have the privilege of talking to customers who are considering a solar system for their residence and are comparing purchasing the system to a solar system lease or Power Purchase Agreement (PPA). Some of the largest installers of residential solar systems in America have grown through the use of the lease or PPA option. It sounds good, just sign a long-term agreement (often around 20 years) for a set electricity rate and you can save 10%, or something close to that, on your electricity costs. So why don’t we offer a leasing or PPA option for residential property?
Leasing on the surface seems like an easy, simple way to “go solar” for a homeowner, but there are also serious disadvantages to a 20 or 25 year lease agreement on a solar system, after which you really won’t own anything. Leasing is considered one of the most expensive ways to “go solar”. The reality is leasing companies are making money on your lease, it’s a great investment for them, not you! This means value from your solar system install is being siphoned off by the leasing company.
Many folks may not live in the same house for 20 or 25 years. As a homeowner, if you have a leased solar system bolted to the roof of your house, what happens if you want to sell the house and move? The lease will need to be transferred to a credit-worthy buyer. This may affect who qualifies to buy your house.
Studies have shown leased systems rarely add value to the house, as the person buying it may not see much value in it. They may not want a used solar system with many years of lease payments remaining. In fact, if the lease has an escalator (which can allow the leasing company to raise your lease payment), there is a future risk of the lease rate being higher than market rates, which would have a negative impact on a sale. There is also a lot of fine print to understand in a lease agreement. Due to these and other issues, residential leasing is falling out of favor in many places in the United States.
Some of the companies who were offering leases are now moving away from them, and there are reasons for this occurring. If you are considering leasing, please do your homework and consider your options. Given the cost of most residential systems and the administrative costs associated with lease agreements which raise the lease payment costs, we believe there is a much better way.
Here at Paradise Energy Solutions, we like to think of our Solar Consultant team not as solar salespeople, but as trusted financial advisors. We want to help our clients make a great investment that will benefit our earth’s environment and pay the maximum financial return to them, not to a leasing company.
We believe the best way for a homeowner to do this is to purchase the system, either with available cash or through a personal loan such as a Home Equity loan. This keeps the incentives, like the 30% federal tax credit, in the homeowner’s pocket. Studies have shown this purchase method immediately adds value to the residence and maximizes the homeowner’s investment return.
Even if you are borrowing money for your solar installation, you can likely make similar payments towards a loan to what you would be making towards a lease, but you would own the system after 10 or 12 years, possibly sooner, with a loan. After the solar system is paid for, you’ll have no monthly payments, you’ll own the system and have free electricity for the remaining life of the system. You will not experience any of these things with a long-term residential lease program.
Check out this great guide for additional information on lenders that offer residential solar financing. In addition, our solar consultants are here to help you. Give us a call at 877-851-9269.