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  • If you were to get a loan equivalent to a Lease you could be paying 9% – 29% interest rates by mathematical comparison. Most solar loans offer rates in the 2.99% – 7.99% range.
  • Leases limit your ability to realize profits from your utility savings. Often solar leases have annual “escalators” that cause your lease payments to increase over time (i.e. your electric costs continue to climb). Unless utility rates rise faster than your solar lease payments you will realize diminishing returns with a solar lease.
  • Leasing company profits are “built in” to a lease – this is profit shifted from you to the leasing company. For a lease company to maximize its profits, they will minimize the cost of equipment and labor to install and maintain the system. This may mean “cheaper” equipment is being installed. Hopefully this is not the case, but that motivation is there for the leasing company.
  • Energy efficiency improvements are one of the best ways to reduce your energy costs, and leases may work against you here. Once you sign a solar lease your home energy bills are largely fixed for the term of the lease (in the form of lease payments). If you later decide to improve your home’s energy efficiency, you will lower your energy use. But with a solar lease your lease payments will not be reduced.
  • Leases are long-term financial liabilities. If you want to sell your home during the lease term the buyer will need to assume those lease payments. This may be a hindrance, and perhaps a deal breaker, when trying to sell your home. For this reason, a solar lease may actually lower the value of your home.
  • Lease payments are “expenses” that are not tax deductible. If you purchase your solar energy system with a loan, that loan interest is usually tax deductible using the mortgage interest deduction.
  • With a Lease escalator, the cost of your solar electricity is rising over time. Therefore lease payment escalators work against you: the cost (expense) of your solar electricity is rising over time with a lease. This diminishes your cost advantages and becomes more like the utility energy you are trying to displace with solar energy in the first place. If you purchase your solar electric (PV) system with cash and/or a loan your payments for that investment are “fixed”. This means the cost of producing solar electricity does not change over the life of the solar energy system.
  • During the term of an operating lease, the leasing company is supposed to insure the system operates properly. However this is a benefit of little value (modern solar systems are largely “maintenance free”), and the likelihood of solar equipment failing during that term is negligible.

The summaries refer to the articles linked below: