Top 4 Reasons Homeowners Choose Solar Leasing Over Ownership

While we don’t recommend leasing over ownership when it comes to solar, many homeowners still get sucked into the leasing loop. It can sound enticing and overall easier… but it can cause more pain in the long run. Below are the top four reasons homeowners choose leasing so you can understand the why when it comes to steering clear of leasing in the future.

1. Ease of Transition From Local Utility

The simple idea of paying a dime for something rather than a nickel and a dime is how solar leases have been sold over the last decade. Electricity is typically billed by the kilowatt hour (kWh) by local utility companies. Solar leases simply modeled this idea and said, ‘get your electricity for a few cents cheaper per kWh.’ The simplicity of that message has led nearly one million homeowners to obtain solar leases. On the surface, it sounds simple and easy. The trouble with this message is that there are about 30 pages of fine print revealing how solar leases can be far more complicated in the future when the homeowner may want to sell their solar home. Unfortunately, most people don’t read the fine print.

2. No Tax Liability

Since the homeowner does not own the solar system, the solar lease company collects the tax credits on the leased solar system. If a homeowner does not have any tax liability then they may be a good candidate for leased solar. The tax credits available for homeowners from the federal government are based on taxable income. If you do not pay enough taxes to have a tax liability, a solar lease may be attractive to you.

3. Debt Aversion

A solar lease is a vehicle to go solar without taking on any debt or out-of-pocket expenses to install solar panels on your home. However, paying cash out-of-pocket is the least expensive way to go solar, followed by financing an owned solar system. The most expensive way is leasing solar. Taking on debt or paying out-of-pocket may feel like too big of a risk just to reduce or eliminate your local utility bill.

The trouble is that the two ownership methods require a large sum of money upfront, or financed over a period of time the homeowner commits to. A solar lease is a much larger financial commitment over time than either ownership method due to the fact it often has annual escalating payments, or flat line annual payments. These payments yield zero equity since the homeowner is making payments on the leasing company’s solar system rather than their own. When only looking at today's monthly payments rather than the lifespan of the entire cost of going solar, the lease may look more attractive.

4. No Choice Is Presented To Own

This is the most common reason why homeowners go solar with a solar lease. Most homeowners go solar after a sit-down sales presentation in their home. A salesperson will present what they believe to be the best product. The best way to ensure no decision is made is to present two options to a homeowner. This may sound counterintuitive but this often creates a paralysis or inability to make a decision. 

The salesperson instead goes with what they think is the best option– which will also be the best option for themselves. It is easier to get someone to make the decision to go solar based on switching to a cheaper cost per kWh than they have with the local utility company, than it is to have them agree to take on a loan to pay for a solar system. If the cons of going solar with a solar lease are glossed over and minimized then it's fairly easy to get someone on board with leasing. 

These are reasons why so many homeowners go with solar leasing over solar ownership. And it's why so many solar companies have pushed solar leases over solar ownership in the beginning. 

Now, we’re seeing a major switch away from solar leasing. The residential solar industry as we know it today is about 11 years old. In 2012, 60% of new residential solar installs were solar leases. In 2021, the numbers are showing a dramatic shift away from solar leasing. 

Remember, you DO have the option to own a solar home. Have questions? Want to learn more? Reach out to a Spark team member today.