Are Solar Leases a Scam?

Solar leases in New Jersey are quite common, and many homeowners who know very little about solar ask about them by name, while most others who know a little bit more will often call them a “solar scam.” Why would someone call a solar option a scam?

Homeowners can use solar leases to go solar for zero down. They make payments monthly with a method like solar PPAs with the only difference being the payment is based on the system cost and a third-party financier’s logarithm rather than a rate of power. Solar leases are an excellent way of saving money for most homeowners if the contract is with a reputable firm and if they don’t have any shortfalls in their solar leasing contract.

There are some attributes of the solar lease which are not desirable by most of the people such as the long contract, the possibility of issues with the transfer of ownership, and any escalation clause. For these reasons, the term “scam,” has been used. The escalator clause states that the lease amount escalates with each passing year. For example, you may start with a rate of $100/month during the first year then according to the clause, it may jump to $102 the next year, $104 the next, and so on. Ideally you should be looking for a lease which locks in the rate allowing you to hedge against rate increases.

Ultimately there came the option of solar loans and they were popular among the people interested in the solar lease. Solar loans enable the homeowners to take advantage of the federal solar tax credit and other available incentives like SRECs which was not always the case with solar lease.

Solar loans in New Jersey are getting popular and can be a great option to go solar. You can choose between doing your own home equity loan or a personalized solar loan option from a solar provider. Solar loans offer relatively low interest rates (3-5%) and can span over a period starting from 5 to 20 years. Loans from a solar company also generally offer an easier approval process and the opportunity to be cash flow positive from day 1 without tapping into the equity of your home.

Arguably the best way is to go solar is to pay cash. People usually don’t consider the cash purchase option because of the upfront cost and the readily accessible financing options. However, if you do some calculations, you will see that the average return on investment for solar in New Jersey is just 5-7 years.

The tax rebate, which the economics of a solar loan or solar purchase will depend, are not beneficial for every homeowner. For example, if a person is retired and not taking in enough taxable income, then the solar tax credit may not be so desirable. Therefore, the solar lease is still the best option for those home owners. But for others, a solar loan or a cash buy is the preferable option to a long term solar lease contract.

Altogether, a solar lease is not a scam. There are just other options out there that may be better if homeowners would do a little more research. If you have a solar lease or want one, there is no need to fret. Just make sure you can easily transfer the ownership, that there is no prohibitive escalator clause, and that you have first considered all the options.

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