Solar Lease
A financing arrangement where you pay a fixed monthly fee to use a solar system owned by a third party — no upfront cost but you forfeit ownership benefits including tax credits.
In a solar lease, a third-party company (SolarCity/Tesla, Sunrun, Sunnova, etc.) owns, installs, and maintains the solar system on your roof. You pay a fixed monthly lease payment — typically $50–$150/month — for a term of 20–25 years. The installer claims the federal tax credit and other incentives since they own the equipment.
Leases are attractive because they require no upfront cost and include maintenance. However, they typically deliver significantly less financial benefit than owned systems. A homeowner who buys the same system captures the 30% tax credit, all electricity savings, and owns an asset that increases home value. A lessee captures only the difference between the lease payment and what they would have paid the utility.
Leases also complicate home sales — the lease must be transferred to the buyer (not all buyers accept this) or paid off at buyout price. Escalator clauses (annual payment increases of 1–3%/year) can erode economics in low-rate environments.
Power Purchase Agreements (PPAs) are similar: instead of a fixed monthly payment, you pay per kWh generated at a contracted rate — typically below your current utility rate but with similar ownership trade-offs.
Real-World Example
The homeowner who signed a 20-year lease at $95/month saved $40/month on electricity (net $55/month benefit) versus the neighbor who purchased a similar system outright and saved $160/month after accounting for the loan payment (net $80/month better), plus owned a $40,000 depreciating asset.