Is a Solar Lease a Bad Idea? When It Is, When It Isn't

A solar lease is not automatically a bad idea, but many of them are bad deals. The ones that go wrong usually share three traits: a payment that rises 2.9% or more every year, a starting price close to what you already pay the utility, and vague rules for selling your home. A lease that starts well below your utility cost, has no escalator or a small one, and has clear transfer and buyout terms can be a fair choice, especially if you don’t have cash.

Why solar leases got a bad reputation

Most of the bad press is earned. Common problems we see in complaints, enforcement actions and our own installer research:

• Escalators that outrun utility rates. A 2.9% to 3.9% yearly increase compounds into a payment that can end up higher than the electricity it replaces.
• Leases sold as purchases. Homeowners think they bought panels, then learn at sale time that a company owns them and has filed a lien-like notice called a UCC-1. See the red flag lease called a purchase.
• “Easy transfer” promises. In reality, the buyer must apply and pass a credit check. See easy lease transfer.
• High-pressure selling. Door-to-door pitches and tablet signing make it easy to agree to 25 years of payments without reading the contract. See door-to-door solar sales.
• Service problems. Some providers have gone bankrupt or been the subject of state attorney general action. For example, Arizona’s attorney general reached a court-approved consent agreement with Sunrun in May 2025 allowing eligible customers to seek restitution, repairs or contract changes.

None of these are about the idea of a lease itself. They’re about how leases are priced and sold.

The escalator math

An escalator raises your payment by a fixed percent every year. It compounds, like interest. Over a 25-year lease, the payment rises 24 times.

1.029^24 ≈ 1.98. A 2.9% escalator nearly doubles your payment.

Escalator	Year 1 payment	Year 10	Year 25	Total paid over 25 years
0%	$150	$150	$150	$45,000
0.99%	$150	$164	$190	$50,800
1.99%	$150	$179	$241	$57,600
2.9%	$150	$194	$298	$64,800
3.9%	$150	$212	$376	$74,000

The difference between a 0% lease and a 2.9% lease starting at the same $150 is almost $20,000.

Salespeople defend escalators by saying utility rates rise faster. Over 2005 to 2025, U.S. residential electricity prices rose about 3.1% a year on average, according to EIA data. After inflation, that’s only about 0.5% a year. Some areas rose much faster, others slower, and recent years have been bumpy. A 2.9% escalator assumes your utility keeps pace forever. If it doesn’t, the lease gets worse every year.

In our lease vs. buy comparison, an 8 kW lease starting at $125 a month with a 2.9% escalator saves about $9,800 over 25 years if utility rates rise 3% a year. If rates rise only 1.5% a year, it loses about $1,200, and the lease payment passes the value of the electricity around year 13. If rates stay flat, it loses about $9,900. For more detail, read solar escalator clauses.

Watch out: A lease payment usually doesn’t change if your utility cuts what it pays for exported power. If your state moves to net billing during your lease, your savings can shrink while your payment keeps rising.

Contract terms that make a lease bad vs. acceptable

Term	Bad sign	Acceptable
Escalator	2.9% or higher	0% to about 1%
Starting price	Close to or above your current cost per kWh	Clearly below it, ideally 20% or more
Term	25 years with no early exit	20 to 25 years with a written buyout schedule
Buyout	“Fair market value” with no formula, or no buyout at all	A price schedule by year, or a clear appraisal method
Transfer	Vague, or transfer fees not stated	Written process, stated credit criteria and fees
Production guarantee	Missing, or pays pennies after a long look-back	Clear guaranteed kWh with fair credits for shortfall
Roof	No coverage for leaks from installation	Roof penetration warranty for the term, plus removal and reinstall terms for re-roofing
End of term	Unclear	Options listed: renew, buy, or free removal
Sales process	Signed on a tablet in one visit	You had the full contract days ahead of signing

A lease that hits most of the “acceptable” column is not a scam. It’s a long-term service contract that may or may not beat your other options.

When a lease can be a reasonable choice

• You don’t have cash, and your loan options carry big dealer fees. CFPB found solar dealer fees typically run 10% to 30% of the cash price. A fairly priced lease can beat a dealer-fee loan. See solar loan dealer fees.
• The provider shares its tax credit with you. Since 2026, homeowners who buy get no federal credit, but lease and PPA providers can still claim about 30% under Section 48E. EnergySage’s H1 2026 data found prepaid leases were 39% cheaper per kWh than buying with cash. That’s the credit showing up in price. A no-prepay PPA, by contrast, was 33% more expensive than cash.
• You want a hands-off system. The provider usually monitors and repairs everything. That’s worth something if you’re older, don’t want to manage contractors, or worry about installer bankruptcies. See solar for retirees.
• You plan to stay in the home for most of the term. Transfers and buyouts are where leases cost the most.

When a lease is likely a bad idea

• You have cash or can get a no-fee loan at a fair rate. Ownership usually saves more.
• You may sell within 5 to 10 years
• The escalator is 2.9% or more and the year-one savings are small
• Your utility has net billing or might soon. Check net metering in your state.
• The rep says it’s a government program or “free solar.” It isn’t. See free solar government program.
• The rep promises your electric bill will be $0. It almost never is. Read why your electric bill is still high with solar.

Questions to ask before signing a lease

1. What is the payment in year 1, year 10 and year 25? Ask for it in writing.
2. What is my effective price per kWh in year 1, based on the guaranteed production?
3. What is the escalator, and is there a 0% option at a higher starting price?
4. Who claims the federal tax credit, and how much lower is my price because of it?
5. What is the buyout price in years 5, 10 and 15? How is “fair market value” set?
6. What does a buyer need to qualify for a transfer? What fees apply?
7. What happens if I need to replace my roof? Who pays for removal and reinstall?
8. What does the production guarantee pay if the system underperforms?
9. What happens at the end of the term? Is removal free?
10. Who services the contract if your company closes or sells it?

Paste any savings claims you’ve been given into the sales claim checker, and put competing quotes side by side with compare quotes.

Already signed and having doubts?

• Check your cancellation window. The FTC’s Cooling-Off Rule gives you three business days to cancel most door-to-door sales. Some states give more. California, for example, gives buyers 65 and older five business days. Use the cancel solar contract tool and read how to cancel a solar contract.
• If you’re past the window, read the buyout and transfer sections of your contract. See solar lease buyouts.
• If you were misled, you can report it to your state attorney general and the FTC at reportfraud.ftc.gov.

Bottom line: A solar lease is a bad idea when the escalator does the selling for the provider. A lease with no or a low escalator, a starting price well below your utility rate, and clear buyout and transfer terms can be a fair deal, especially in 2026 when providers can claim a tax credit you can’t.

Run your own numbers with the lease vs. buy tool.