Solar Home Financing 101: What’s a Pre-Paid Solar Lease?

In our last Solar Home Financing 101, we discussed the common features of a typical solar lease, a great way to go solar with little to no money down.

On the other hand, if you have the cash or a home equity loan and were thinking about buying your solar system, then consider the Pre-paid Solar Lease.

Here’s the scoop:

With a pre-paid solar lease, you’re paying 20 years’ worth of monthly solar leasing payments up front. So, it’s very similar to buying the solar system, except that the leasing company maintains ownership. There are several advantages to this arrangement:

You get a discounted price. When an REC Solar consultant compares numbers for a pre-paid solar lease, you’ll find that it’s a lower price than if you purchased the solar system from REC. That’s because as a business, the leasing company can take advantage of all of the tax incentives, rebates, and depreciation, and pass those savings on to your pre-paid solar lease price.

You get all the benefits of a standard solar lease. That means all maintenance, repairs, insurance, and solar monitoring is included in the pre-paid price. It’s no-hassle solar, and no monthly leasing payments for 20 years.

No escalator. As mentioned in the previous solar financing 101 post, solar leasing companies sometimes charge an “escalator” to match utility rates rising. With a solar lease, there’s no escalator, which means that your solar electric rate is locked in at a low price per kWh for 20 years. It will never go up.  So, as utility rates rise over 20 years, you’ll save more money than a standard $0 down lease with a 2% to 3% annual escalator.

The solar lease is transferable. Just like a regular lease, the pre-paid solar leasing contract is transferable to a new homeowner, who will get to keep the solar system until the contract ends, or the new owner can purchase the system at the end of the contract at fair market value.

Although you won’t be directly benefiting from the remaining years of solar savings, the good news is that an NREL study has shown that homes with solar systems sell 20% faster and for 17% more than a comparable home, so you may recoup your investment within the sale of your home, just as if you’d purchased the solar system.

Everyone is different when it comes to financing solar, but the bottom line is that you will save thousands of dollars over 20 years. It’s just a matter of what type of financing is best for you and your budget, but don’t guess! Contact us now and let one of our solar financing expert go through the numbers for your home. Takes about 20 minutes, and you’ll have a great estimate of how much you’ll save with a pre-paid solar lease—or another financing option.

For the next Home Solar Financing 101: The Solar Power Purchase Agreement (Solar PPA).

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