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Solar Rental Agreements

 

What’s a solar lease?

A solar lease is much like a car lease. Someone else owns the equipment, and you pay a monthly fee to lease it.  A solar lease differs from a solar power purchase agreement (PPA) in that you are leasing the equipment, whereas with a PPA, you’re simply paying for the energy that the equipment produces. Both leases and PPAs can have either fixed, escalating, or de-escalating monthly payments over the life of the agreement.  In a sense, they’re very similar agreements, in that someone else owns the system and you simply get access to lower, more predictable energy costs as well as a clean source of energy.

The advantage of a solar lease or PPA is that instead of making a large investment in solar panels, you can get started for little to no money down. Figuring out if a solar lease is worthwhile is fairly easy: if the total amount of your monthly lease combined with your new, lower electric bill is less than what you’re currently paying for energy, leasing is a good option for you. You’ll be able to start saving money from the first day your panels are installed, for little to no upfront investment.

When does it make more sense to own panels instead of leasing them?

If you plan to stay in your home a long time and can afford the up-front cost of solar panels, it may may more financial sense to buy them yourself because the total return onr you investment is likely greater. What you give up is the hassle-free aspect of leasing because the leasing company monitors, maintains, insures, and guarantees the production of the system. Some studies even suggest that owners of monitored and maintained systems may produce more solar energy and therefore realize greater financial benefits.

What happens at the end of the lease?

When your lease is over (leases can vary in terms from 10 to 20 years), you’ll have a few options.  Many solar companies will sell you the panels at the end of the lease for a very nominal amount (sometimes just a $1).  This is usually decided up front and is part of your lease agreement.  If this hasn't been prenegotiated, you can renew the lease for a new amount of time, buy out the system for a fair market value, or ask your leasing company to remove the system. When you’re getting quotes, it’s best if the leasing company can quote what the specific buy-out value of your system will be ahead of time. Leaving that value vague  means the leasing company can name any price they want at that point and generally does not benefit the homeowner. If you move before your lease is over, you will need to transfer the lease to the new owners–a nice feature, since solar power increases the value of your home.


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