Solar Leasing Explained – NerdWallet

Solar leasing allows homeowners to use energy from rented solar panels. Instead of making a down payment, homeowners typically agree to make monthly lease payments for several years. Solar leasing can be especially good for people who don’t qualify for solar loans and don’t plan to move soon.

5 things to look for in a solar lease

Solar leases aren’t all alike, so it pays to compare. Here are some features to look for.

1. Performance guarantee: This ensures the homeowner will be compensated if the solar panels fail to produce a stated minimum amount of electricity. Performance guarantees are also an excellent incentive for the leasing company to maintain the solar panel system properly during the lease.

2. Low or no escalators: Escalators are increases in the monthly payment (usually between 1% and 5% annually)^[0]

3. $0 down: In general, this is a desirable feature. However, making a down payment could lower the lifetime cost.

4. Company stability and reliability: Ask how long they’ve been in business and how many solar power systems they’ve installed through solar leases. Check the Better Business Bureau, read verified customer reviews and get personal customer references. Additionally, find out who will repair and maintain the leased panels, and confirm that technicians are certified by the North American Board of Certified Energy Practitioners (NABCEP). 

5. Automatic payment options: Your monthly payment may be lower if you sign up for automatic payments^[0]

Solar leasing offers some distinct advantages.

• Often no money due upfront: Leases provide a way to enjoy solar energy without making a large initial investment.

• Cleaner, greener energy: By using less grid electricity, you’ll lower your carbon footprint. Solar energy also reduces water consumption^[0]

  Solar Energy Industries Association. Solar Energy. Accessed Apr 19, 2024.

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• Quick and easy approval: Generally, it’s easier and faster to qualify for and get a solar lease compared with a solar loan. 

• Savings on your electric bill: You get to use the electricity that the solar panels produce. So if your lease payment is less than what you were paying for electricity from the grid, you could save money every month. 

• No worries about repairs or maintenance: The solar lease company is responsible for repairing and maintaining the panels.

• Predictable payments: You know exactly what you’ll pay each month; it’s specified in the lease contract.

There are also some significant drawbacks that come with solar leasing to be aware of, such as:

• Not qualifying for tax incentives. Because leasing isn’t the same as owning (and leasing doesn’t involve a share in a community solar project), you don’t qualify for the federal tax credit or for state tax incentives. In fact, the solar lease provider gets the tax breaks^[0]

• Price escalators. These contracted annual increases (usually between 1% to 5%) are common in solar leases, so it’s likely your costs will continue to rise over the life of the lease.

• No increase to property value. Although purchasing solar panels may increase the value of your home, solar leases usually don’t improve property value.

• Possible difficulty/complications selling your home. Prospective home buyers may not want  to assume your lease when you move. If you’re unable to transfer the lease to the buyer, you may be stuck with an expensive lease buyout when you sell. Some companies will allow you to take the panels with you and continue the lease from your new home^[0]

• Reduced savings on your electric bill. The cost of lease payments offsets your savings on electric bills. 

• Panels may be lower quality. Leasing companies may not use the best solar panels, which means you might not reap the full solar energy production potential in your location.

• Service may be poor. Customers may have difficulty getting leasing companies to perform maintenance on solar panel systems.