Thinking about investing in a solar PV system, but are unsure whether to buy or lease a solar PV system?
We’ve got the facts.
Buying or leasing a solar Photovoltaic (PV) system is strikingly similar to buying or leasing a car, except that a bought solar PV system actually adds value to your home.
When you lease a solar PV system, you simply pay the fixed monthly lease payments, regardless of the power the system generates. When you buy a solar PV system, you can pay in cash upfront, or finance it, often with a zero money down option. In that sense, a lease and a loan act in a similar way. Many leases also have an “escalator” built into them, meaning the amount you pay each month will increase over time.
What about my credit rating?
If buying a solar PV system, and paying in cash, this is not applicable. If buying a solar PV system using a loan, the credit rating required varies greatly. However, when leasing, the general rule of thumb is that a high credit rating is required (over 660).
What happens at the end of the lease agreement?
If you bought your system, you owned your system from day one and you will keep owning it for the life of the system (oftentimes 40+ years). If you leased the system, after the lease period ends (generally 20 years), you can buy the system at the “market price”, or have the leasing company come remove the system free of charge (and go back to paying exuberant prices for electricity). There is a third option, which is renewing your lease.
What’s the payoff period?
The payoff period for a system that you own depends on the prices of electricity, the size of the system, the local renewable incentives offered, and the size of the Federal tax credit (which is currently 30%). For example, in Massachusetts, many homeowners are seeing payoff periods of less than 7 years. That means after seven years, electricity is free for the life of the system. When it comes to leasing, only the leasing company has a payoff period, while you keep paying them a fixed price (plus the price escalator) every month for up to 20 years.
How will the solar PV system affect my home value?
In 2013, the Colorado Energy Office conducted a study titled “The Impact of Photovoltaic Systems on Market Value and Marketability”, and they found that PV systems add value to the home and decrease marketing times (the amount of time it takes to sell a home). This, however, is only applicable to PV systems which are owned by the home buyer.
When it comes to selling a home with a leased solar PV system, the lease contract should have instructions on how to handle this. Sometimes, the homeowner may have to pay off the lease in order to sell the house. Realtors mention that the PV system lease is a hassle, when selling the home.
The Colorado Energy Office found that while the market pays a premium for a PV system that is owned, educating buyers is key. The housing market places a value on saving money each month, but the value will differ market to market and house to house.
Interested in learning more on whether you should buy or lease a solar PV system? Check out the video below and visit the Energy Sage website for a breakdown of the details of leasing vs owning a solar PV system.