Today we sat down with Andrew Mullen, Director of Sales for Solaroo Energy to discuss a hot topic in solar – leasing vs. buying. As the state of Utah has landed on the solar map due to our sunny weather and rising electricity costs, more and more companies are entering the market with different financial products relating to solar. Leasing has been popular in many states, and is now entering our local market where purchasing solar systems has traditionally been the way almost all solar customers have installed their systems. So what are the differences? Which method is better? Let’s discuss 3 important considerations.
#1 – How much do you pay?
Knowing how much you are paying when purchasing a solar system is pretty easy. There is usually a purchase price stated on your bid. If you are financing the purchase, then you should multiply your payment by the number of payments you are required to pay. For a lease, it is a little more difficult, because your payments start out lower, and escalate over time—similar to a variable rate mortgage, or your current electricity rate. But you should have documentation that outlines what the payment will be each year of your lease. “Make sure you see how much your lease payment is increasing by each year, whether it is 2% or 3%, or whatever,” Mullen cautions. “Leases have the lure of a low initial payment, but if you add up the payments over the life of the lease, it will usually be more than the payments of purchasing your system.”
#2 – Owning vs. Renting
Owning vs. renting is a debate that goes on with many products. Rent or buy a house? Lease or buy a car? Now you can even lease your phone. But the debate with owning or renting your solar system is a little different. Purchasing your system is pretty straight forward. You own your system, you own the power. Leasing your system can bring up questions that you need to answer in your lease paperwork. For instance, will you own your solar system after your 20-year lease? A car is easy to turn in to the dealership, but a solar array that is fixed to the structure of your roof is not. Be clear on what happens at the end of your lease. “Most common solar leases are not ‘fair market’ leases, which basically means that you won’t own your system at the end of the lease,” Mullen continues, “With these types of leases, most customers are expected to update their equipment and sign a new lease at the end.” One benefit to renting an apartment, for example, is that maintenance and repair is done by the landlord. With solar, warranties are provided in both scenarios, so it is important to know what is covered and what is not.
#3 – Selling your house
One important consideration when weighing the pros and cons of a lease or a purchase is, “What happens when I want to sell my house?” With a purchase, there are reports that vary on how much your house appreciates in value. But the prospect is that your solar system is reducing your payment on your house, and therefore increases the value. With a lease, the same is true, it should increase the value of your home. However, there will be some red tape to navigate as your lease will have to be taken over by the new buyer of your home, similar to having a car lease taken over midway through the lease. The new buyer will have to qualify to take over that lease, and they will pick it up wherever you left off. Whatever your preference is, make sure you know the details of each transaction, and make sure you have a trusted solar consultant helping you with the decision. For more information about solar leases and purchases, click here.