Solar Lease Or Pay Cash For Your Solar Panels

Very few American's actually buying their solar systems with a big wad of cash. As is the case in the auto industry,  America's most residential solar consumers have purchased solar for their home, fall into two categories. They have either started a solar panel contract where payments are spread over the life of the system or, if they have got a cash price from an installer, they have practiced some other finance to pay this upfront price.

The Solar Industry

In the solar panel industry, many people are often excited that one way or the other is better, but I don't think that either approach of getting a solar system is always the soundest. In my view, the answer as to whether it is better to lease or buy your solar energy system depends on the financial situation you currently have. Your intentions concerning your home, the expense at which you can obtain finance, the character of your credit score and a whole variety of factors unique to the individual.

This is not a general debate on the “pros and cons of purchasing a solar energy system” the advantages and disadvantages related to below refer only to one method of financing a purchase over another. 

Solar Lease

I observe that people use the term solar lease to define three different types of agreement.

The first is a solar lease. The second is an operating lease; and
the third type of transaction is a Solar PPA contract which is not a lease.  It is an agreement to purchase power produced by the solar panels that someone else installs on your home. A large bulk of general contracts are operating leases. An operating lease is negotiated like renting, payments are estimated operating expenses and the asset being leased stays off the balance sheet. In contradiction, a capital lease is more like a loan. The asset is managed as being owned by the lessee so it stays on the balance sheet. The accounting treatment for capital and operating leases is modified.

Most solar leases are Capital or finance leases because the contract is for more than 75% of the anticipated life of the solar panels and contains a discounted buy out provision at the end of the lease interval to allow the householder to buy the solar equipment.

Not all states have been authorized to have solar leasing because for solar leasing to work a state had to pass laws to get it done.  These laws are such that a lessor of a solar system could also enjoy any state, county or utility-based solar incentives that were usually available to a purchaser (owner) of a solar system.

Most of the biggest solar states in the US such as California, Arizona, New York, Massachusetts, New Jersey and Connecticut are ones that have made the legislative modifications required to allow lessor's of solar panels to enjoy the same incentives as owners of bought solar systems.

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