Solar Loans vs. Solar Leases

Financing with Solar Loans vs Leases: Pros, Cons, and Just Plain Scams

Solar energy offers the best long-term price of electricity compared to other sources of power, but even with the 30% federal solar tax credit, upfront cost is still a barrier for many people. Thankfully, solar loan products are available, allowing you to trade your existing power bill for a monthly payment on a solar loan.  

Solar loan benefits at a glance:

A solar loan works similarly to another popular finance tool – the solar lease – but unlike a lease, the loan gives you the powerful benefit of owning your power. Owning means you get to receive the financial incentives and long-term savings from your system, which is not the case if you opt for a solar lease.

At ReVision Energy, we favor loans over leases for numerous reasons, and have created this guide to break down the differences between these two financing options. 

The main differences between a solar loan and a solar lease involve:

  1. Who owns the system
  2. Who receives the solar benefits and incentives
  3. What happens when you sell your home

We also cover common solar scams and what to look out for when you receive a solar lease proposal. Contact our solar advisor team if you have additional questions or to learn more about financing your own solar project! 

solar loans vs. solar leases .pngWhen you sign a solar lease, you are essentially renting your solar panels from the company who installed them; they own the system. Since you don’t own your array, you can’t access certain financial benefits, such as the federal tax credit or state specific incentives.

Solar leases also do not protect you from rising utility costs. Most leases have built-in yearly cost increases to account for changes in utility rates. If your lease cost increases faster than electricity costs, you could end up paying more for electricity per kilowatt-hour than if you never went solar at all.

Rising Rates vs. Locked-in Savings

While both a lease and a loan will have monthly payments, the lease's monthly payment will escalate over time to adjust for expected utility rate increases. If the cost of energy doesn't rise as fast as your monthly lease payment, your solar savings will take even more of a hit.

A solar loan's monthly payment is the same until the system is paid off, usually in 15-20 years, depending on which loan you choose (most ReVision customers opt for a 15 or 20 year option from our lenders.) ReVision is able to structure solar loans to closely match what you already pay for power, so with a loan you can effectively trade your power bill for solar. After your solar array pays for itself, you enjoy free electricity for the remaining life of the system, which has an expected working life of 40+ years.

Solar leases do not offer the same steady, long-term savings. Because rising lease payments consume a large portion of your utility bill savings, you don’t achieve the same financial benefits of solar through a lease as you do with a loan or cash purchase.

Here is a helpful chart that sums up the benefits of loans and leases: 
solar loans vs solar leases comparison chart

As you contemplate a loan vs. a lease, you may wonder, "Should I even install solar if I might move someday?" We say, "Absolutely." Recent studies have shown that solar increases a home’s value as well as the likelihood that it will be sold. Studies like this make banks increasingly comfortable with solar, meaning it should continue to get easier to use a low-interest home equity loan or home equity line of credit product to invest in solar.

Jefferson Barn Finished.jpegFor homeowners considering a solar financing option, a solar loan is a more favorable financing method for those interested in selling their home. With a loan, you can feel confident that your solar investment will pay for itself, either over the life of the system as you live in your home, or by fetching a premium price should you need to sell your home.

Like any other appliance or home improvement project, your solar PV system gets factored into the value of your home and the new homeowners take up the steady, unchanging loan payment (or enjoy the savings if the system is fully paid off).

In comparison, it is harder to deal with a lease when selling your home. People who enter solar leases often find themselves wanting to terminate their lease, but unable to do so unless they either pay for the entire system in full or transfer the lease to new homeowners, which can be difficult and expensive. For these reasons, interested buyers are often deterred by a home with a solar lease.

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Beware of solar financing scams!

As the cost of solar continues to decrease and national interest increases, we have seen a rise in solar scams, false advertising, and just bad business. You may have seen ads touting “free solar panels” or promising “solar at no cost.” These are a) false promises and b) dangerous to the solar movement as a whole, since they create bad experiences and sometimes irrevocable financial damage to people who are eager to go solar.

False Production Promises 

Solar lease proposals often grossly overestimate key factors that make their proposed "savings" too good to be true. We often get asked by potential or existing customers to help evaluate lease proposals and have noticed that most are getting proposals that either:

  1. Grossly inflate the potential production of the system
  2. Inflate the assumed rise of utility rates in the coming years to make their savings look more promising
  3. Both!
Solar Scams

Solar programs that promise "free solar" are usually just plain scams. They are often national companies trying to prevent you from going solar with local, mission-driven solar installers. Even if the offer isn't a straight up scam, they can be misleading and exploitative. Offers of "free solar panels" or "no cost solar" can be attempts to lock unsuspecting homeowners into complex leases with poor returns and sharply increasing monthly payments. 

To avoid being roped into an unfavorable lease or scammed by a misleading (sometimes nonexistent!) company, always research and speak with the company you are considering as your solar installer. Always make sure you fully read and understand the details of the solar lease before signing anything.

Find a solar installer who prioritizes transparency and education.

Amy SDS site visit.pngSolar scammers will often use urgency to get you to sign a questionable solar contract; remember, making the right decision takes time and a legitimate, experienced solar company will give you the time and space for you to decide.

Our team of solar experts are happy to walk interested residents through details of their proposals, contracts, and financing options, and will answer any and all questions to make sure you know exactly what you are getting. The more you know, the better we can do our job and bring you the best solar experience possible.

We’re a 100% employee-owned certified B Corp, and have been a top New England solar installer since 2003. Whether you purchase your system upfront or go solar through financing, we are here to help and support you along your solar journey. Contact our team below to get started today!