Leasing Solar Systems

Leasing a solar system is a popular method of having solar installed on your home. The concept with a lease agreement is that for no money down you can have solar installed for free. Nothing is free and the homeowner basically pays for the lease on a monthly basis. The pitch is that they will save you money on you utility bill, for example they might save you $200 a month but your lease payment might be $150 a month to the solar leasing company so the net savings is $50 a month. I’ll cut right to the chase…overall I would never recommend a lease to anyone.  There is too much of a downside to signing one of these leases. Here are just a few of the hidden highlights that people don’t understand when they sign the lease agreement.

  • You will never own the system
  • Your lease payment will increase over time. Most leases include an escalator rate, increasing the cost each year. I have seen rates from 3% to 5% . The justification is that your utility rate will increase so the lease rate will also increase. This is great until an economic recession hits and utility rates drop. This happened in 2008 and leasing customer quickly found themselves paying more for their solar systems.
  • At the end of the lease there are automatic renewals so even after paying for 20 years you will continue to pay.
  • The biggest downside is the buyout clauses involved in these leases. If you sell your home you can have the new homeowner take over the lease or you can buy it out. Put yourself in the shoes of the home buyer,  why would they ever take on the balance of a 20 year liability. They will either force you to lower the price of your home or to buy out the lease.  In this case you just gave them the negotiating advantage.

Here are some news stories that I’ve gathered highlighting the issue others are having:


 

Rooftop Solar Leases Scaring Buyers When Homeowners Sell  bloomber.com

“Dorian Bishopp blames the solar panels on his roof for costing him almost 10 percent off the value of the home he sold in March.”


Why leased solar panels may not be an asset when a house is up for sale The Washington Post

“Lynn Farris, a realty agent with Windermere Hulsey & Associates in Vacaville, Calif., says disputes arising over solar-panel leases are “becoming an increasing problem” for sellers and buyers, and because of the rising popularity of solar, “it’s going to get worse.” She has seen sales fall apart when the parties couldn’t agree on how to handle the substantial payments owed on long-term leases”

 


Solar Panels can be a Deal Killer

“More companies are offering home owners a contract to lease solar panels where they pay no upfront costs for the installation and could start saving on their electricity bills right away. But home owners who sign onto these deals are finding some snags when they go to sell.”


Leased Solar Panels Cn Cast a Shadow Over a Homes Value NPR

“”The buyers all the sudden disclosed that they hadn’t looked at the solar lease and that the lease was going to go out for another 15, 16 years,” Auditore says. In last-minute negotiations, he and his real estate agent agreed to credit the buyer $10,000 in exchange for assuming the rest of the lease.”