Buying a Home with Leased Solar Panels: Everything You Need to Know
Updated: August 1, 2023
After tireless efforts, you’ve found the perfect home that has everything you want and more, including solar panels on the roof. If you are in the housing market, a leased solar panel system can complicate things and may even serve as a deal-breaker for those looking to avoid another hassle in an already stressful pursuit.
Of course, at ShopSolar.com, we are strong advocates for solar energy in every sense of the word, but systems should also make financial sense. We allow our customers to shop solar panels and solar panel accessories, primarily for small, DIY installations. For those looking into full property solar solutions, we have developed this article to help educate new movers on everything there is to know about buying a home with leased solar panels.
How do Leased Solar Panels Work?
To kick things off, let’s talk about how a solar panel lease works and what it means to potential home buyers. Leased solar panels allow homeowners to reap the benefits and low costs of clean, renewable energy without having to invest in a full home system.
In smaller scenarios, off-grid solar panel kits can be purchased and installed on cabins, RVs, boats, and more. For homes large and small, property owners have the option of leasing their solar energy equipment or purchasing a system outright with cash or financing.
By utilizing a solar lease, the parts and labor of an installation are typically offered at little to no upfront costs in exchange for a fixed monthly payment. In this sense, a solar lease is much like an auto lease or another structured loan payment, where the lessee does not technically own the asset (or solar panels in this instance).
Solar Leases vs Solar Purchase Power Agreements (PPAs)
Solar leases and solar purchase power agreements (often referred to as PPAs) are similar, but critically different types of solar power purchasing. The key difference between the two is the structure of the payment plan.
In a solar lease, a fixed monthly payment is made for a set amount of time to cover the cost of the installation. The solar energy produced by the system is then virtually credited towards the home’s electricity bills through net metering.
In a solar purchase power agreement (PPA), home and building owners agree to purchase the actual solar energy that is produced by the leased panels at a rate that is lower than ordinary utility expenses. PPAs are generally more common at the commercial and utility-scale solar generation levels.
How long do Solar Leases Last?
Typical solar leases last between 20 and 25 years. So if you are buying a home that has brand new solar panels, it may be decades before the fixed terms of the contract are no longer in place. Most solar energy systems can also be “bought out” at any moment during the terms of the lease, based on the fair market value or conditions stated in the contract.
It is also possible to terminate many solar lease contracts early. Depending on the provider, this may incur an additional cost. Upon completion of the lease, those who do not wish to renew the terms will likely have the solar energy system removed at no cost.
Do Leased Solar Panels Save You Money?
Yes, in most cases, leased solar panels will save home and building owners money on utility expenses. Solar panel leases are created to disperse the low investment costs of a modern solar energy system over its multi-decade lifespan. With this, fractional monthly payments are almost always lower than power purchased from the electric utility.
Buying and Selling Homes with Leased Solar Panels
If you’re buying a home with leased solar panels, then the lease terms and agreement must be transferred into your name. As the new lessee, you will have the option to continue the lease as is, purchase the system outright, or terminate the agreement and remove the panels if the terms of the contract allow it.
Pros of Buying a Home with Leased Solar Panels
With easy-access sustainable energy gaining popularity all over the world, there are more homes with leased solar panels than ever on the modern housing market. Almost always, people are not selling their homes because of their solar lease, so there are still many great benefits of continuing the contract as a new buyer.
Aside from the carbon offset of adopting clean, renewable energy, purchasing a home with leased solar panels may provide buyers with the following benefits:
- Low, expected electricity costs for the remainder of the lease agreement
- Home purchasing power from a lower potential pool of buyers dissuaded by complicated lease agreements
- No future system maintenance costs or concerns, as everything is handled by the lessor
Cons of Buying a Home with Leased Solar Panels
Unfortunately, homes being sold with solar panel leases add an additional consideration to the already overwhelming home buying experience. For this reason, some house hunters will not even consider purchasing a home with leased solar panels simply to avoid another potential headache.
In addition to a bit of extra paperwork, buying a home with leased solar panels may also result in one or more of the following drawbacks:
- Potential transfer costs (if included in the contract)
- Increased monthly payments for low-electricity users
- Another credit check and other potentially disqualifying measures
Should I Buy a Home with Leased Solar Panels?
Unless the terms of the contract are unreasonable, there are typically very few downsides to buying a home with leased solar panels. Whereas purchased solar panels typically increase the selling price of a home, leased solar panels do not increase the property value of which they are installed.
Knowing this, most homes with leased solar panels can enjoy long-term savings without the property being purchased at a premium cost. Aside from your realtor’s advice, it is always best to be directly in contact with the solar panel lessor so as to fully understand the terms of the lease before you agree to be the new owner.
If you end up deciding against a home with leased solar panels for any reason, but still have the solar bug, we suggest starting small with a foldable solar panel. Also known as folding solar panels, small-scale solar generators can power your backyard parties and trips across the country with free solar energy anywhere in the world.
In conclusion, if you’re not afraid to put in a little bit of effort to ensure a smooth transition, buying a home with leased solar panels is a relatively painless money-saving process. While renting a solar panel system may not always be a part of everyone’s house-hunting plan, favorable monthly payments, lowered expected electricity bills, and emission-free energy are all great reasons to buy a home with leased solar panels.
If your electricity demand is too small to warrant a solar panel lease, we suggest looking into a DIY solar power system.
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