Lease vs. Purchase

3D rendering of a modern house

Leases/PPA: If your credit score is good enough, you may be able to lease a solar system, or sign up for a Power Purchase Agreement.  The Leasing/PPA companies own the system they put on your roof (that’s why you don’t pay anything when they install them!), but you are now obligated to buy the electricity produced by their system.

Make sure you understand that since they (not you) own the system they get the 30% Federal Tax Credit or any other benefits that goes to the owner of the solar system.  Check out how much the lease rate will increase every year (usually by almost 3% every year), and if you sell the property you will have to find someone who is willing to take over your lease or there may be early termination penalties.  Leasing may be a good option for those who have no tax liability, and for those who have less than 10% equity on the house.

Purchase: The solar system is purchased using one’s own personal fund (cash).  This is the simplest and most direct way that saves you the most money and gives you the best ROI (Return on Investment).

With purchase, there is no increase in the cost of electricity produced by the system over time.  This is unlike leasing which forces you every year to pay increasing rates for the same amount of electricity.

With purchase the value of your property will also go up.  The Lawrence Laboratory in Berkeley has shown that the value of the property will go up, often-times by a greater amount than the cost of the system. Leasing and PPA will most likely lower the value of your property.