Solar Lease Disadvantages: The Hidden Costs of 'Free Solar'

The most fundamental disadvantage of a solar lease is that you never own the solar panels. The solar company owns the equipment on your roof, and you're essentially renting it for 20-25 years. This has significant implications that are often glossed over during the sales process.

Because you don't own the system, you don't receive the federal solar tax credit — the solar company does. This is a 30% credit on the full system cost, which on a $25,000 system amounts to $7,500 that goes to the leasing company, not you. Some companies pass a portion of this benefit back to customers through lower lease rates, but many do not.

You also don't build equity in the system. If you had purchased the same system with a loan, after 7-10 years you might own a $25,000 asset outright. With a lease, after 25 years you have nothing — unless you exercise a purchase option, which is typically priced at fair market value at that time.

Most solar leases include an annual escalator clause that increases your monthly payment by 2-3% per year. This is often presented as a minor detail, but the compounding effect over 25 years is substantial. A $150/month payment with a 2.9% annual escalator becomes $300/month by year 25 — double the original amount.

Solar salespeople often justify the escalator by pointing to historical utility rate increases, arguing that even with the escalator, you'll still save money compared to utility rates. This argument has merit in some markets but is speculative — utility rates don't always increase at the projected rate, and some states have seen rate decreases or flat rates in recent years.

The escalator also makes it harder to evaluate the true cost of a solar lease. When comparing a lease to purchasing a system, the total cost of the lease over 25 years (including all escalated payments) is often significantly higher than the purchase price of the system — sometimes by $10,000-$20,000 or more.