As a solar company wholeheartedly aligned with our customers’ interests, we deeply detest the practice of leasing solar systems!

Here, we detail the black holes and pitfalls involved:

1. Cost!
   Leasing initially requires no payment upfront, with payments made monthly, leading many to mistakenly think it’s cost-effective. However, the eventual cost you pay can be more than six to seven times the system cost!
   
   • Because you do not own the system, the 30% federal tax credits for solar systems and other state incentives in the US are enjoyed by the solar company on your behalf. You get no financial benefit from these incentives. However, all the calculations presented to you in the contract are based on the original price!
   • After the 30% tax rebate, the solar company’s costs for the system are generally recouped within four to five years (considering a 25-year lease term). In other words, if you were to purchase rather than lease the system, you could pay it off in just four to five years with the same monthly payments. This means that in the 25-year leasing period, every penny you pay after the first five years is pure profit for the solar company!
   • During the lease, your monthly payment increases each year proportionally. By around the 20th year, the monthly payment will have doubled. With these increases, your total payment will be more than six to seven times the cost of the system! Tragically, even after spending so much, you do not own the system at the end of the contract!
   • Of course, some people genuinely cannot afford to pay tens of thousands of dollars upfront for a solar system. In such cases, obtaining a conventional loan can achieve the same goal. Common options include solar loans or personal loans. With a loan, you won’t have to worry about annual payment increases. And because you can take advantage of all current solar tax benefits, your monthly payments or the repayment period will be significantly lower. This means that initially, you pay nothing, but after just a few years, your investment pays off, and for the next several decades, you enjoy high net earnings!
   • If you choose leasing instead of a loan, consider another potential loss. Currently, interest rates are at a high point in recent years, and the monthly lease payments are calculated based on these rates. If you opt for a loan, even if current rates are high, you can refinance anytime the rates drop to reduce your monthly payment. For example, if rates drop from 7% to 2.9% a few years later, and you have a remaining loan of $16,000, your monthly payment could drop from nearly $200 to $150! On the other hand, once you sign a leasing contract, your monthly payments will only increase over the next twenty-plus years.

So, being as smart as you are, would you still choose to lease after reading this?

2. Traps
   Aside from the cost issues, leasing has several significant traps:

A. Under NEM3.0, only electricity production is guaranteed.
We have seen several real leasing contracts from other companies, where the most prominent clause guarantees annual electricity production.

However, as we mentioned in a previous article, under NEM3.0, annual electricity production is not the most important metric. If the panels are poorly positioned, leading to overly concentrated generation times, if the battery capacity is insufficient, or if usage habits are poor, the actual effect of the annual electricity production can be halved or even worse!

More importantly, what should be considered is battery capacity!

Yet, in the same contract, total battery capacity is not mentioned.

By the way, a major company’s leasing contract charges over $100 per month for battery leasing (only stating the number of batteries without specifying capacity). However, even a 14-kilowatt battery, if fully charged and used daily, would only save about $100 on your electric bill per month based on nighttime rates. Thus, such contracts are merely deceiving customers!

B. If the house needs to be sold or sublet, the leasing contract becomes a huge burden!

There’s a saying in the solar market: If you own a solar system, it adds value to your property; if you lease a solar system, it becomes your liability!

In the US, the average duration a family lives in one house is 13.2 years. This means most homeowners will sublet or sell their house to someone else after a decade or so.

Whether it’s subletting or selling, if the solar system is purchased outright and the system size is substantial, it can increase the property value by 3% to 4%! But if the system is leased, it’s considered a liability, and based on the calculations above, likely a loss-making debt. For example, ten years later, your monthly payment rises from $200 to $300,

but at that time, the same price could buy a system far surpassing its electricity efficiency. Thus, neither tenants nor buyers would be willing to take over such a long-term leasing contract.

Then, your only option at that time is to buy it out. But as they say, it’s easy to invite the devil in but hard to send him away. You can imagine that the buyout cost will be very high, high enough that you’ll deeply regret ever choosing to lease.

3. Beware of the fine print: the leasing contract automatically renews!

For those who have signed a leasing contract, or who have taken over a previous homeowner’s leasing contract when buying a house, please carefully review the contract. There might be a clause that states if you do not actively request to terminate the contract with the solar company the month before the end of the 25-year contract, the contract will automatically renew for several more years! Moreover, the rent might even double!

Ask yourself, who can guarantee that after 25 years, they will still remember to take care of this critical task in that specific month? What’s more likely is that after 25 years, you can’t even find the contract! So, we estimate that over 90% of leasing customers end up passively renewing at a higher price.

4. Beware of the fine print: you lose the chance to participate in class-action lawsuits!

Some contracts will state that by signing this contract, you waive the right to participate in any class-action lawsuits against the company in the future! This means that when someone brings a class-action lawsuit due to unfair terms or significant hazards, you cannot participate, nor can you receive any compensation after a successful verdict!

These are just some of the risks and black holes associated with leasing. If you have more lessons or warnings to share about leasing issues, please contact us for guidance and mutual learning.