Solar lease vs loan vs cash

When does buying solar outright win?

If you can pay cash, plan to stay in the house for twenty years or more, and want to own the equipment, cash usually beats every financed option on lifetime cost. You pay once. Nothing compounds, nothing is filed against your property, and no third party sits between you and the panels. We sell subscriptions, and this is still true.

What you take on instead is the maintenance, the insurance, and the inverter that will need replacing somewhere in the middle of the system's life. Those are real costs, and a cash buyer who pencils them in is doing the arithmetic properly. TheNREL cost benchmark is where to check whether a cash price you were quoted bears any relation to what the hardware and the labour cost, because it prices a system from the parts up rather than from a sales target down.

One thing has changed and it changed the honest answer: the 30 percent residential federal tax credit is gone for new installs, so it is no longer the reason to buy. Your own tax position is a question for your CPA, not for anyone with a quote in their hand. The rest of what happened to that credit is at is the solar tax credit gone.

What does a solar loan really cost?

A loan keeps the ownership upside and adds two things cash does not have: interest, and a filing against your house. On a $25,000 system at an assumed 6.99 percent over 25 years, the payment runs about $177 a month and the total lands near $53,000. The disclosed rate is not the whole price.

Here is the part that moves the number more than the rate does. TheConsumer Financial Protection Bureau found that dealer fees on residential solar loans commonly run 10 to 30 percent of a system's cash price, get added to the loan amount, and do not have to appear in the disclosed annual percentage rate the way other finance charges do underRegulation Z. Roll a 20 percent dealer fee into the $25,000 example and the payment becomes about $212 a month, or roughly $63,500 over the 25 years. That is within a few thousand dollars of the lease total below, on the product that gets sold as the cheaper one.

Solar loan terms commonly run anywhere from about 10 years to 25 years, and the longer the term the smaller the payment and the larger the total. We are not going to print an average solar loan APR we cannot source; rates move, and the number that governs your money is the one on your own Truth in Lending disclosure. The 6.99 percent above is a round figure chosen so the arithmetic is legible. Ask the lender for the APR, the term in months, the total of payments, and the cash price of the same system with no financing attached, then compare those last two to each other.

The filing matters at closing, not at signing, which is why most people meet it years late. A solar loan is usually secured by a UCC-1 fixture filing recorded in the county land records, and it has to be paid off or subordinated before the house changes hands. The detail is atdo solar panels put a lien on your house, andwhere to search for a solar lien names the office in your county, which is almost never the one people check first.

An aside, because it comes up at nearly every kitchen table: a UCC-1 fixture filing is not a judgement and it is not a second mortgage. It is a notice that somebody else holds an interest in equipment bolted to your house. Harmless enough while you live there. It still has to be cleared before a title company will close, and that is the part that catches sellers out, usually about nine days before a closing date they have already booked movers for.

Why is a 20 to 25 year lease or PPA rarely the better deal now?

Because the term and the escalator multiply. A $150 payment rising 2.9 percent a year reaches about $298 by year 25 and totals roughly $65,000, for panels you never own. Then there is the sale: a buyer has to qualify for the contract and assume it, or you buy it out. That is where these deals break.

At 3.9 percent, which is inside the range leases are commonly written at, the same $150 payment totals closer to $74,000 and passes double before year 20. The convention behind those figures, payment in year N equals the payment multiplied by one plus the escalator, raised to the power of N minus one, is spelled out with a full table onsolar escalator clauses. Make whoever is selling print the schedule rather than describe it.

A lease can still be the right answer, and it would be dishonest to pretend otherwise. A long-term owner who priced the flat-rate version of the same offer, found the higher year-one payment worse over the horizon they really have, and signed anyway with the year-25 number on the table has made a defensible trade. The common case is not that one. The common case is a homeowner who was shown month one and never month 300.

Where does a subscription fit?

In the gap the other three leave: no money down, no loan, no lien, and a commitment of 36 months rather than decades. You pay for the power the system makes, the provider owns and insures and maintains it, and the price rises a fixed 1.9 percent a year. You never own the equipment. That is the trade.

On a $300 monthly electric bill, typical savings run around 40 percent, which puts the combined monthly cost somewhere near $180. That is an estimate rather than a promise, and your own figure depends on your roof, your usage, and your utility. Across the whole 36-month commitment the 1.9 percent escalator compounds to about 5.8 percent in total, which is the reason the escalator argument that matters so much on a 25-year lease mostly stops mattering here. A small grid-connection charge from your utility stays on your bill either way; ask for the exact figure on your quote.

Two pages cover the parts this one deliberately does not repeat.Solar lease vs subscription has the contract-mechanics comparison, including what the exit costs on each. Andwhat a $0-down pitch leaves out is worth reading before treating "no money down" as an argument, because it applies to the loan column and the subscription column alike.

Four prices, one example home

Assumptions, so you can disagree with them: one home, a $300 monthly electric bill, a $25,000 cash price for the system, the same system financed at an assumed 6.99 percent APR over 25 years, a lease written at $150 a month with a 2.9 percent annual escalator, and a subscription at $0 down with a fixed 1.9 percent escalator. Round illustrations, not a quote for your roof.

How do you compare four prices that are not the same shape?

Carefully, because two of them price equipment and two of them price power. Cash and a loan buy a system and leave you with whatever your utility still bills. A lease and a subscription quote you a monthly figure that already assumes production. Put them on the same page only after you know what your utility would have charged.

So the comparison that means something has three columns, not one: what you pay for the system, what your utility still bills you, and how long you are locked in. Most quote sheets show the first and quietly assume the second. Check the electricity side against theEIA's state price tables rather than against a projection from whoever is selling, and read theFTC's own page on what a solar company is allowed to claim about savings.

There is a second asymmetry worth naming. A 25-year total is a real number for cash, a loan, or a lease, because you are committed to all 25 years. It is a made-up number for a subscription, because you can leave after month 36. Anyone who prints a 25-year subscription total next to a 25-year lease total is comparing an obligation with a guess, and that includes anyone selling for us.

Who should not subscribe?

Anyone who wants to own the asset and is confident they are staying put. Anyone who can pay cash and wants the lowest lifetime cost. Roofs that need replacing first, heavy shade, renters, condo owners, anyone who cannot clear the credit screen, and anyone a new monthly obligation would strain. If that is you, we say so.

The flip side is the part most people have upside down. If you are not planning to stay in this house forever, that is an argument for the subscription rather than against it, because the worst case you can carry into a closing is the remainder of 36 months with nothing filed against the title. The longer version of that argument, with the case against written first, sits atis subscription solar worth it.

What should you ask before you sign any of the four?

Six questions, asked against the contract and not against a summary sheet or this page. A seller who will not answer all six in writing has already answered the question that matters. Write the answers down, date them, and keep them with the paperwork you sign.

1. What is the cash price of this exact system, with no financing attached?
2. If I finance it, what is the APR, the term in months, and the total of payments?
3. Is anything filed against my house, and in which office is it recorded?
4. What does the payment read in year 1, year 10 and year 25? Print the schedule.
5. What is the first date I can leave with no fee?
6. What will my utility still bill me every month on top of this?

If you already have a contract in hand, the solar contract checker reads it on your own device and quotes the escalator, the term, the filing, the transfer terms and the cancellation window back to you. Nothing is uploaded. And if you want to know why the person across the table leans toward one of these four,how solar salespeople get paid lays out who is paid when under each structure.

Get your number

Run your bill through the estimator and see what the subscription column looks like on your own roof. It takes about a minute, and a real person follows up with the exact figures, escalator included. If you would rather read the mechanics first, start withhow the whole model works. Then check every number on this page against the specific agreement in front of you, ours included.