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Published on February 9th, 2014 | by Zachary Shahan


Solar Leasing vs $0-Down Solar Loan — Scenarios In 10 States

February 9th, 2014 by  

The competitiveness of solar leasing vs a $0-down solar loan is a question that has come up many times in my mind. It’s also a topic that comes up a lot in the comments on CleanTechnica. Using EnergySage’s cool new “Instant Solar Estimate” tool, I decided to run through comparative scenarios for homes in 10 different states. The results actually surprised me quite a bit. Check them all out in this Solar Love repost:

Yesterday, I wrote an article about EnergySage’s new Instant Solar Estimate tool. The tool uses proprietary market price data and “the industry’s leading tools and databases” to deliver pretty awesome solar cost and solar savings reports. One thing it does that I haven’t seen elsewhere is that it compares the financial benefit of going solar through a cash purchase, a $0-down solar loan, and a $0-down lease or PPA (where these are available). If you checked out the example screenshot shared in the article, you probably saw that solar leasing was really lame on this metric. The 20-year savings (for “Anytown, USA”) were:

  • Cash purchase = $23,000
  • $0-down loan = $9,900
  • $0-down lease/PPA = $2,700

Yikes, $2,700 vs $9,900?

Of course, that’s just one scenario, and it seems that it’s not even for a real home. So, I decided to run some estimates for real addresses in various states where solar leasing exists in order to see what other estimates would show. I had to make a “best guess” for the electric bills, so don’t take any of this as fact (well, don’t take any such estimates as fact), but enjoy the interesting findings I came up with:

1. San Jose, California

(Address: 286 N 24th St, San Jose, CA 95116 | Monthly electric bill: $150)

In this case, solar leasing actually beat the $0-down solar loan:

San Jose solar

2. San Diego, California

(Address: 3802 Monroe Avenue, San Diego, CA 92116 | Monthly electric bill: $50)

Here, the $0-down solar loan inches out the solar lease:

San Diego solar

3. Phoenix, Arizona

(Address: 1019 East Hiddenview Drive, Phoenix, AZ 85048 | Monthly electric bill: $300)

The $0-down loan ends up losing you money, while the lease saves you $12,000!

Phoenix solar

4. Colorado Springs, Colorado

(Address: 7425 Julynn Road, Colorado Springs, CO 80919 | Monthly electric bill: $150)

Again, the lease wins (not counting the cash purchase, of course, which crushes it):

Colorado Springs Colorado solar

5. Boston, Massachusetts

(Address: 37 Edison Green, Boston, MA 02125 | Monthly electric bill: $125)

Here, the $0-down loan crushes it:

Boston solar

6. Baltimore, Maryland

(Address: 4408 Eldone Road, Baltimore, MD 21229 | Monthly electric bill: $125)

Neck and neck:

Baltimore solar

7. Newark, New Jersey

(Address: 541 Clinton Avenue, Newark, NJ 07108 | Monthly electric bill: $120)

$0-down solar loan is twice as good as solar lease over 20 years:

Newark solar

8. Tacoma, Washington

(Address: 3712 North Frace Street, Tacoma, WA 98407 | Monthly electric bill: $150)

The $0-down solar loan bombs, but the solar lease saves you money:

tacoma solar

9. Honolulu, Hawaii

(Address: 456 Mananai Place, Honolulu, HI 96818 | Monthly electric bill: $200)

$0-down solar loan beats solar lease, but both completely crush not going solar:

Hawaii solar

10. Albany, New York

(Address: 28 Lawnridge Avenue, Albany, NY 12208 | Monthly electric bill: $200)

$0-down solar loan wins again:

albany solar loan

Solar Leasing vs Solar Loan vs Solar Cash Conclusions

So, in my somewhat random selection of addresses, and using the best estimates for electric bills I could come up with*, it turns out that solar leasing and the $0-down solar loan option actually tied (5 to 5) for the # of times that they were the better option! Interesting, and I have to say that I wouldn’t have guessed it. Also, there was huge variation in some cases, while they were very similar in other cases.

In all the cases, you can clearly see that a cash purchase gives you the best return — that’s a given. The key questions with that option would be: 1) do you have the money for a cash purchase, and 2) where else would you potentially invest or spend that money if you didn’t use it to buy a solar system and leased or got a loan instead.

Of course, financial savings aren’t the only matter to take into consideration. Solar leasing/PPA contracts also often take care of maintenance, monitoring, and almost all the paperwork of going solar (including tax stuff). Also, the EnergySage tool assumes you can take advantage of incentives in your state. However, if your financial situation doesn’t allow that for some reason, a solar leasing/PPA company still could and could pass on those financial benefits (minus profit and company costs).

In the end, though, I think the EnergySage tool shows one thing very clearly: there can be huge financial variation using different financing options. The best thing to do is to look at all of your options, get actual quotes from different installers, and then go solar in the way that best works for you. There’s no simple solution that’s best for everyone.

*I searched out average electric bills in each city except one and then in each of those cities found homes for sale that were a similar size as the homes for which I found average electric bills.

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About the Author

Zach is tryin' to help society help itself (and other species) with the power of the word. He spends most of his time here on CleanTechnica as its director and chief editor, but he's also the president of Important Media and the director/founder of EV Obsession and Solar Love. Zach is recognized globally as a solar energy, electric car, and energy storage expert. He has presented about cleantech at conferences in India, the UAE, Ukraine, Poland, Germany, the Netherlands, the USA, and Canada. Zach has long-term investments in TSLA, FSLR, SPWR, SEDG, & ABB — after years of covering solar and EVs, he simply has a lot of faith in these particular companies and feels like they are good cleantech companies to invest in. But he offers no professional investment advice and would rather not be responsible for you losing money, so don't jump to conclusions.

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  • bahenc

    I may be wrong but I could not trust energysage calculator. Don’t they have incentives to show users savings and then directing them to their partners who are paying them referral dollars?

  • Darren Cooper

    One important variable is missing, the 30% tax credit pays for nearly one third of the solar system if the solar asset is purchased but, not on a PPA or lease. Once a solar loan is paid off (usually under 10 years) the owner will have another 15 – 25 years of free energy. The electric company’s rates will be enormous then and the solar owner will have free electricity. This will be an enormous amount of money in the future. This huge variable that hasn’t been factored into the above examples. Bottom line, solar leases and PPA’s are white elephants and the worst possible way to go solar long term.

  • DesertRat

    A monthly bill of $50 for San Diego is not realistic, especially if they run blowers for heat and air conditioning.

    You said “… it turns out that solar leasing and the $0-down solar loan option
    actually tied (5 to 5) for the # of times that they were the better
    option!” I find this very hard to believe considering that a PPA (isn’t that like a lease?) only provides about 40 to 50% of your needed power. That’s what I was told by Vivent when they offered me a PPA. In addition, the customer pays for ALL the power generated by the solar system whether they use it or not.

    I decided to buy a system outright and expect it to more than pay for itself over the 25 years life.

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  • Timothy Cervantes

    What about the increase in home value for the home owners in each of the scenarios? With a lease, it’s ZERO. Savings yes, but calculate the equity increase and I think it’s clear the lease option is a losing prop. Not a solar guy here but a home shopper in escrow for home that the current owner is in yr 2 of a 20 yr lease.

  • Gene

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  • Frank T

    Perhaps take a survey of readers from different states of their actual power history over the months and years to publish a more accurate article. I’ll start:

    I live in Rowland Heights, California zip: 91748.

    Energy costs for Southern California Edison (SCE):
    Tier 1: 14cents/kwh
    Tier 2: 17cents/kwh (kicked in at around 417.22kwh)
    Tier 3: 31cents/kwh (kicked in at around 565.61kwh)
    Tier 4: 34cents/kwh (Tier 4 started at around 814kwh)

    My year long consumption and costs goes like this:

    August 13′- 3077kwh @ $882.56
    Sep 13′- 1455kwh @ $369.41
    Oct 13′- 874kwh @ $197.03
    Nov 13′- 1067.5kwh @ $260.12
    Dec 13′- 1261kwh @ $323.21
    Jan 2014- 1173kwh @ $295.18
    Feb- 1213kwh @ $309.71
    Mar- 1041kwh @ $247.07
    Apr- 975kwh @ $189.51
    May- 899kwh @ $209.95
    Jun- 1317kwh @ $341.96
    Jul- 1900kwh @ $557.01

    Total year consumption of 16,252.5kwh @ $4,182.72 (or $348.56 a month)

    SC (solar leasing company) quoted us:

    7.5KW system with a first year output of 10,873kwh. lifetime (20 year lease) output of 207,430kwh. Costing us nearly 20 cents per kwh over the lifetime of the system after factoring in annual escalation. Costing a total including estimated taxes of $43,381.78

    Using the Energysage tool my estimates (including incentives) came out to:

    Monthly payments: $0
    Net cost $ 28,000.
    First year savings: $4,800
    20 year net savings: $96,000
    5.5 years payback period.

    ($0- Down Loan):
    Monthly payment $210
    out of pocket: $0
    First year net savings $2,300
    20 Year net savings: $74,000
    immediate payback

    ($0-Down Lease/PPA):
    Monthly payment: $300 (Actual quote for a 7.5KW dc system is $180.86 per month over 20 years)
    out of pocket: $0
    First year net savings: $1,200 (Actual calculated 1st year savings from above 2013-2014 usage: $2008.12)
    20 year net savings: $37,000 (Estimated 20 savings: $40,162.4)
    immediate payback

    “What If I do nothing?” costs: $130,644 over 20 years to be paid to SCE assuming 3.2% annual rate increases (investor owned electric company.)

    $130,644 (cost of electricity over 20 years if nothing is done)-$43,381.78 (cost of leased system over 20 years producing 207,430kwh) = $87,262.22 (direct savings, leaving 117,620kwh to be paid to SCE)

    Assuming 24 cents average of 4 tiers of SCE prices x 117,620kwh (surplus usage that the system does not produce) = $28,228.80 (I realize this is an inaccurate measurement, just want to get kind’ve a baseline to calculate with)

    So over twenty years I’ll be paying:

    $28,228.80 (Southern California Edision)+ $43,381.78 (Solar Leasing Company) = for a total of $71,610.58 over 20 years or $298.37 per month. (V.S current monthly payments of $348.56)

    $348.56-$298.37= savings of $50.19 a month or $12,045.6 over twenty years. (Vastly different than the previous “20 year savings” of $40,162.4 or $37,000 from their estimate)

    What am I doing wrong?

    • Bob_Wallace

      Without getting into the more complex math of when you pay, let’s just do some simple math….

      “$28,228.80 (Southern California Edision)+ $43,381.78 (Solar Leasing Company) = for a total of $71,610.58 ….”

      $71,621 / 7,500 watts = $9.55 per watt.

      That would send me looking for some bids to put a system on my roof for a direct purchase. By the end of last year the US average price of solar had fallen to $4.91/W. That includes no subsidies. And SoCal should be the cheapest place in the US to buy a solar system.

      The 30% federal subsidy lowers the $4.91 to $3.44. That’s getting really close to one third the long term lease cost.

      Now, the math is a bit more involved. You’d be paying earlier with non-inflated money, that sort of thing, but I’d get a couple of installers to give me their version of the math of owning in your area.

      Leasing is better than doing nothing. I’d lease before I’d do nothing. Some savings is better than no savings. But I’d fully understand my options before signing.

  • Corey M.

    The problem with these calculations are they do not accurately reflect the added equity value in your home upon installation when purchasing the solar solution. Compass bank, Wells Fargo and other credible sources offer loans that upon installation will add the total price of the project to the total value of the home then loan against the new value for the solar solution. Example: a home value prior to install is $300,000 and the solar project is $30,000, the banks will now offer a loan against the equity in the home based on the new value being $330,000. This is a fact and not an opinion. In other words, in this scenario the home owner can now sell the home for $30,000 more and still benefit from the rebates, credits etc. Leasing does not allow any of this. If anyone should have any further questions I can personally be reached at arizonasolarwave@hotmail.com.

    • Bob_Wallace


      The amount owed does not determine the selling price. We’ve seen plenty of upside down homeowners to know all about this.

      And please don’t spam this site. I’m leaving this one up only to shoot down your incorrect claim.

  • Dimitri Soto

    why doesn’t this article talk about the after life of the systems. Once the loan is paid off then everything after is savings even if the solar system last 30 years that’s 10 more years of free energy compared to the lease where you will still have to pay for energy. For a standard solar power unit priced under 20,000 the loan is the better option especially if you keep adding the energy cost 10 years after the 20 year contract.

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  • Ray Boggs

    On the surface, getting a solar system on your roof from a solar leasing company for no money out of pocket might seem like a great deal, but here are the facts behind this type of rental financing. When you sign that solar lease contract you’ll be forfeiting the 30% federal tax credit which can typically be worth about $3,500 to $10,000. You’ll also be forfeiting any applicable cash rebate or other financial incentives. After collecting both the 30% federal tax credit and any cash rebate, the leasing company will also apply accelerated depreciation. Despite applying all of the financial incentives, on a $0 down 20 year solar lease, the leasing company will then charge you 20 years worth of leasing payments that many times will include up to a 2.9% annual payment escalator that will raise your monthly payment, every year for twenty years.

    The leasing companies will try to convince you that a solar system requires a lot of maintenance and expensive insurance and costly monitoring when nothing could be further from the truth. Modern grid tie solar system require little to no maintenance and the bulk of any repairs are covered by the manufacturer’s and installer’s warranties. Solar panels and many inverters come standard with a 25 year warranty. Insurance can be added through your homeowner’s insurance policy with little to no increase in your premium and many solar systems come standard with built in, web based monitoring.

    The bottom line with insurance, repairs and monitoring is that a leased solar system will typically cost you up to three times more than a purchased solar system, so it is actually you who will be paying for these services, not the leasing company. The leasing companies will try to convince you that these services are free but with a system cost that’s triple that of a purchase, these services are absolutely not free.

    The leasing companies will try to convince that their rental financing is the only $0 down option in town, which again is not true. There are plenty of $0 down loans available that even offer tax deductible interest. Solar leases and PPAs do not offer tax deductible interest.

    What’s worse is that after paying 20 years worth of leasing payments that amount to triple the amount that you could have paid if you purchased your system instead, you won’t even own the solar system. It will still be the leasing company’s property. If you want to own it after paying your lease off, you will still need to buy it from the leasing company at fair market value. All this for only a 10 to 15% reduction in your electric bill. This is just the tip of the solar lease and PPA iceberg. For more information simply search the term solar lease disadvantages in any major search engine. There’s a lot you should consider before signing that airtight 20 year lease contract.

  • jeffhre

    What about including the discounted value of money to be saved later and the opportunity costs of cash to expended now?

  • Andrew

    Hi there. Does the analysis include the cost of replacing the inverter in the cash and loan scenarios? Also, yes the San Diego analysis is fairly useless with a $50 bill. Being a San Diego integrator, the average bills are much higher than that (in the $150-200 range) especially with the massive rate increase we experienced in September to pay for the cost of the de-commissioning of the San Onofre nuclear plant.


  • Steven C

    Why was such a low average used for SD? The numbers are so miniscule to even resemble a significant meaning

    • CaptD

      I noticed that also and think that perhaps this is the amount of energy that is being billed above Tier 1 &2 which is currently priced very low as compared to higher Tiers. This will change soon as the local utility SDG&E has already gotten the OK from the CPUC to completely revise the rate structure which will again end up benefitting them and their shareholders instead of ratepayers in San Diego!

      You might be interested in this chart showing that SoCal has some of the highest energy costs in the USA, thanks to utilities cashing in at the expense of ratepayers.


      • Steven C

        They already have! Recouping over $500 mil until 2016, which started last Sept. I have seen tiers 3 and 4 at almost $.40kwh

        JJust last week we approved new power plant in Otay Mesa, costing ratepayers $1.6 bil. You think our rates are bad now, the worst is yet to come. Also for the environmentalists

        I am an energy consultant for one of the top residential solar companies in all of North America

        • CaptD

          Yes San Diegans are being raped by the CPUC and yet our MSM outlets almost never say a word because SDG&E is too powerful for them to cross…

          So Energy rates in SD will continue to climb and that will further affect the ability of SD to attract new businesses and retain the ones that are currently here.

          SD is rapidly becoming like one of the Hawaiian Islands, a great place to visit and/or live if you have lots of money but if you don’t then expect to become a second class citizen.

    • DesertRat

      They are obviously from SDG&E, which, even today (2015), says the “average” monthly cost of electricity in east county (Santee) is $57. I find that hard to believe. I am a skin flint and don’t use any more electricity than necessary to get through the day. My average bill for the previous three years was over $100 per month with at least two months of the summer over $300 per month.

  • jburt56


  • Dave

    I hope readers take this article with a grain of salt. I can’t speak for every state, but the assumptions for WA are WAY off the mark. In fact, there is no leasing option currently in WA, and the $0 loan is actually very attractive. Unfortunately, the assumed cost of the system, interest rate, and financial performance in this article are so far off from reality that it leads me to question the author’s motive in the first place. READERS BEWARE: it is almost always best to purchase the system, even using a loan, unless you cannot use the incentives/tax credits. Zachary, would you be willing to disclose any potential conflicts of interest you might have in regards to this article?

    • Solar Pioneer

      Your comment that WA is way off the mark is obviously correct. Just look at the monthly bill of $150. Why would anyone install a $87,000 system on a home with that small a bill? Say you assign a $3.25W installed cost that is a 26kW PV system, just not reasonable. The author should at least vet the work before publishing?

      • mardy930

        Power in WA is hydro generated and really cheap. Like 6 cents a KWH so if your monthly bill is 150.00 you’re using a lot of juice.It’s also not sunny all the time. A lot of rain and clouds blocking the sun and short days during winter. You need a lot more panels to generate the same power as say arizona.

  • agelbert

    Thank you.

  • ronwint

    Hi Zachary. Thank you for taking the time to post this data. Would you happen to know what pricing (per watt) EnergySage used in both the purchase and $0 down loan scenarios. If it was greater than $3.00 a watt before incentives then that might explain why a lease faired better in those couple of examples. Also, I wonder if EnergySage takes into consideration the re-sale value of a purchased system when comparing to a leased (rented) system. A 10.6 year payback in San Jose, for a purchased system, assuming no cash rebate and only the 30% federal tax credit as an incentive would seem to place the system pricing at about $6.00 a watt or double the $3.00 per watt market rate, before incentive rate.

  • Jean-Philippe

    Unfortunatly, this analysis doesn’t consider the value of money. In the loan or lease scenarios, you pay interest while the opportunity cost of interest in the purchase scenario are not considered, strongly skewing the analysis toward this scenario.

    Financial analysis should be made according the basic principle of value of money overtime in order to have adequat investment decision.

    • rcharlesm

      This point merits emphasis. Given the amount of money involved and the 20-year time horizon, a corporate bond would be an obvious alternative. Because most of the benefit of the PV is not taxable, the comparison should be with a bond’s after-tax return. Eyeballing the San Jose example, I have assumed a $20,000 after-ITC initial cost and a $2150/year saving. On those assumptions, the break-even point for a comparison with the PPA alternative is about a 4% after-tax return on the bond, but even with a plausible lower after-tax return — say, 3% — the advantage of a cash purchase over PPA is much smaller than the example shows, and of course with an above-4% return, the advantage shifts to the PPA.

  • OakenTruncheon

    Useful article, do you have comparison data for Albuquerque?

  • Matt

    A couple of small issues with EnergySage.
    It doesn’t give information on the size system it is pricing on your house.
    Some times it lists the total information as a cost verse a saving. But I think there is a bug, look at your case 8 (minus $50k total cost) that would imply a $50k Savings (but that isn’t what the chart looks like.

    • 1- I think they estimate it based on satellite shots of the roof. But would have to check.
      2- Yeah, wording issue there… 😀
      3- Yes, in the end, you need an actual installer to take a look.

    • Alfred02

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