It’s the most alluring pitch in the solar industry: “You can get a complete solar panel system on your roof for zero money down. Just sign here, and you’ll start saving on your electricity bill with a low, fixed monthly payment.” This is the offer for a solar lease or a Power Purchase Agreement (PPA). It sounds like a risk-free way to get the benefits of solar energy without the high upfront cost.
Unfortunately, for many homeowners, this “free” system can turn into a 25-year financial trap filled with hidden costs, escalating payments, and major complications. While a lease can be the right fit for a very small number of people, it is often sold to homeowners who would have been far better off with a traditional loan. Before you consider this path, you must understand the common traps that salespeople rarely disclose.
Trap #1: You Forfeit the Biggest Financial Incentive
This is the most significant and often misunderstood detail. The 30% Federal Solar Tax Credit (ITC) is worth thousands of dollars. When you sign a lease or PPA, you do not get this tax credit. The credit can only be claimed by the legal owner of the system. In this case, that is the third-party finance company that owns the equipment on your roof. They get the multi-thousand-dollar tax benefit, not you. A deceptive salesperson might “forget” to mention this, or worse, imply that you are still eligible for it.
Trap #2: The Annual “Escalator” Clause
Buried in the fine print of nearly every solar lease agreement is an “escalator clause.” This clause states that your “low” monthly payment will increase by a set percentage, typically 2.9%, every single year for the 20-25 year term. This may seem small, but it adds up significantly.
A $150/month payment today will become over $200/month in ten years and over $300/month by the end of the contract. This annual increase can eventually erase any savings you had over your utility bill, and in some cases, can even lead to you paying more than you would have to the utility.
Trap #3: The Nightmare of Selling Your Home
This is the hidden danger that causes the most stress for homeowners. A solar lease is a 25-year secured contract. If you decide to sell your home in year 10, you cannot simply move and leave the system behind. You have two options:
- Lease Transfer: The new homebuyer must independently apply for, be approved by, and agree to assume the remaining 15 years of your lease contract, with its escalating payments. Many potential buyers are unwilling to take on this long-term liability, which can make your home significantly harder to sell.
- Lease Buyout: To sell the home free and clear, you must “buy out” the remainder of the lease. This can cost tens of thousands of dollars, an unexpected expense that can wipe out a significant portion of your home equity.
Trap #4: Questionable Performance Incentives
With a lease, the solar company is responsible for maintenance. This sounds great, but consider their incentives. Their goal is to do the absolute bare minimum to meet the terms of the contract. A system can be underperforming by 10-15% due to a few dirty or partially shaded panels, costing you money in lost production every month. However, as long as the system is technically “working,” the company may have no contractual obligation to send a crew to clean it or optimize it, as it’s not a “broken” part.
Trap #5: End-of-Lease Surprises
What happens when the 25-year term is finally over? The contract will typically give you three options, none of which are great: you can either renew the lease at a new (and likely higher) rate for old, outdated technology; you can pay the company a significant fee to come and remove the system from your roof; or you can purchase the 25-year-old system from them at its “fair market value,” a price that is often a point of contention.
Conclusion: Know What You’re Signing
For most homeowners, a solar loan that allows you to own your system and claim the tax credit is a far superior financial decision. A lease is often pushed by salespeople because it’s an easy sell, not because it’s the best option for the client. If you are in a solar lease and now realize these terms were not clearly explained to you, our case review can help. We analyze lease agreements for deceptive language and misrepresentations made during the sales process to determine if you have grounds for a dispute.