What to Know Before You Sign a Solar Lease
If you’re thinking about installing solar panels for your home in California, a prepaid solar lease is one of the most affordable financing options.
Before you sign one, however, it’s important to understand how it works and what the payment structure will look like.
Keep reading for a full breakdown.
What Is a Solar Lease?
A solar lease is a financing model that allows you to go solar with a lower upfront payment. There are two types of solar leases: a standard lease and a prepaid lease. A standard lease has many downsides. A prepaid lease, on the other hand, lets you go solar for 70% of the cost with the same long-term savings as a cash purchase.
Here’s a closer look at the difference between a standard solar lease and a prepaid solar lease.
Standard Lease
A standard solar lease is a financing agreement through which a third-party leasing company pays to install solar panels on your roof, and you pay a monthly fee to use them. It sounds good in theory, but most standard leases have hidden fees and price escalators that make them a lot more expensive than they seem at first glance.
Prepaid Lease
A prepaid lease is a new path to owning solar. It’s a financing model through which our leasing partner claims a commercial solar tax credit and passes the savings on to you. You pay 70% of the system's cost, and we install solar panels and optional battery storage at your home. Our leasing partner owns the system during the 6-year lease term. At the end of the 6-year term, they will transfer ownership to you.
This system works because, while the residential solar tax credit has been eliminated, a commercial solar tax credit still exists. A prepaid lease agreement allows a leasing partner to benefit from the tax credit and pass those savings on to you without locking you into a long-term contract with monthly payments.
What Does the Payment Structure Look Like with a Prepaid Solar Lease?
The payment structure for a prepaid lease is very simple. Here’s what you can expect:
One-time payment of 70% of the system’s cost - You’ll pay 70% of the total cost, allowing you to receive the full value of the solar tax credit immediately, without having to wait around for a credit.
No monthly payments - The upfront cost is the only payment you’ll make. There are no ongoing monthly payments with a prepaid lease.
Pay cash or finance - You can either pay your 70% upfront cost in cash or choose to finance it with a loan from your preferred lender.
What Are the Benefits of a Prepaid Solar Lease?
A prepaid solar lease lets you go solar with a lower upfront cost and the same long-term savings as a cash payment. The key benefits include:
Lower upfront costs - You pay just 70% of the cost to install solar panels.
Same long-term savings - Lifetime savings are higher with a prepaid lease than a standard lease or PPA.
No waiting for tax incentives - You benefit from a lower installation cost immediately, without having to wait for tax season to roll around.
Maintenance costs covered - For the first 6 years, our leasing partner will own and maintain your system.
Own your system after 6 years - When your 6-year agreement ends, our leasing partner will transfer full ownership of your system to you.
Are There Downsides to a Prepaid Solar Lease?
As with any investment, there are considerations to take into account before signing a prepaid solar lease.
The first is equipment selection. The third-party owner must comply with the regulations set forth by the 48E Clean Electricity Investment Credit, which includes restrictions on equipment manufactured in China. That means your options are slightly limited. However, this isn’t an issue for most homeowners. We’ll work with you to select compliant, high-performing solar equipment that works well on your home.
The second consideration is ownership. In a prepaid lease, you will not own your system for the first 6 years. That has a lot of upside, including that you won’t be responsible for maintenance. But it also means that you won’t be able to alter the system during that time period, and it could make it more challenging to sell your home. If you’re not planning to sell your home or make significant changes to your electricity use in the next 6 years, however, these are not concerns.
Go solar for 70% of the cost with a prepaid solar lease. Call (707) 873-7721 today for a free consultation.
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