RAR Energy

Essential Guide to Solar Panel Leases

What Is A Solar Lease?

Similar to a car lease, a solar lease is a type of third-party ownership (TPO) in which you do not actually own the item for which you are making payments.A solar lease is like renting solar panels. A company puts them on your roof and charges you a monthly fee for the electricity they make.This rate is determined by companies using your solar system’s expected annual production as a basis, and it is included in your contract. Additionally, your lease will have a set term, usually 20 or 25 years.

Even if you start by renting solar panels, you might be able to buy them later. But there’s a catch: you’ll usually pay more than what they’re actually worth. And if you want to stop renting early, it can cost a lot. So, buying your solar system might not be the best deal after all.

How the Process of Solar Leasing Operates

Solar leasing is a great way to go green without breaking the bank. You don’t need a lot of money upfront to get started. Instead, you pay a monthly fee like you would for a car lease. The solar panels are owned by the company, so you don’t have to worry about maintenance. This makes it easy to enjoy the benefits of solar energy without all the hassle. Solar leasing offers an appealing alternative for quick access to renewable energy, with average terms of about 20 years and an annual adjustment to match market conditions. This ensures households can make the move to renewable energy with ease and confidence.

Key Elements Of A Solar Lease Contract

  • Term: Typically 20-25 years, matching solar’s long-term benefits.
  • Payments: Gradually increase over time (escalators) to adjust for inflation.
  • End of Lease: Choose to renew, buy the system, or have it removed.

Solar Leasing vs Electricity Purchase Agreements

Solar leases and PPAs are similar financing options for solar systems. The main difference is in how you pay. With a lease, you have a fixed monthly payment. With a PPA, you pay per kilowatt-hour (kWh) of electricity your system produces. So, if you want a predictable monthly bill, a lease is a better choice.

Solar Leases vs Solar Loans

Solar leases and loans are both ways to finance a solar system. Loans let you own your panels and get tax credits, while leases don’t. Loans are usually shorter (5-15 years) than leases (20 years). With a loan, you’re responsible for maintenance, but leases often include maintenance programs. Leases may have increasing monthly payments (escalators).

Benefits of Solar Leases

  • Lower electricity bills: You can save money on electricity costs during the lease period.
  • Little to no upfront payment: You don’t have to pay a lot of money upfront to get solar panels.
  • No maintenance worries: The leasing company takes care of repairs and maintenance since they own the panels.

Drawbacks of Solar Leases

  • Less savings than buying: You’ll save less money over time compared to buying panels or getting a solar loan. Lease payments may also go up each year.
  • No access to tax incentives: Since the leasing company owns the system, they get the tax benefits, not you.
  • Can complicate selling your home: If you sell your home during the lease, you’ll have to either buy out the lease or find a buyer willing to take it over, which can be difficult.

Conclusion

If you plan to stay in your home for the next 20 to 25 years and want to reduce your electricity bill with minimal effort, a solar lease could be a good option. But if you think you might sell your home before the lease ends and want to get the most savings, buying the system or getting a solar loan is a better choice. For custom quotes from trusted installers to maximise your solar savings, check out RAR Energy.