Leasing solar panels: how does it work? What’s the difference between solar panel leasing and subscription?

Most people choose to buy their solar panel system outright. However, this can be a significant investment and may be out of some households’ budgets. Leasing has emerged as an alternative, giving consumers who want to rely on renewable energy access to solar panels without the large upfront cost. Let’s take a look at how it works.

On the other hand, a solar panel subscription is another way of financing your solar panel installation which oftentimes is confused with leasing. And because we would like you to make informed decisions, let’s take a look at how it works and also at the differences between solar panel leasing and subscription.

Note: Otovo is a credit broker, not a lender. Our lending entity EDEA Limited offers a Hire Purchase product, which is not the same as leasing. Finance subject to status.

How does solar panel leasing work?

Leasing is defined as a financial arrangement in which a person pays to use something for a particular period of time (known as a fixed term).

When solar panels are leased, a third party installs them on your property, then sells you the electricity they generate. These payments can increase over the term. The rate at which they increase will be noted in your agreement, so make sure you take this into account before you sign anything.

The fixed term is normally around 20 years. Once this is over, you can buy the solar panel system, have it removed, or renew your lease and continue making monthly payments.

Solar panel leasing agreements can differ, so always check the terms and conditions carefully before you sign up.

Can tenants lease solar panels?

Unfortunately, if you're renting your property, you aren't eligible for a solar panel lease. Only homeowners can install solar panels because the leasing contract typically spans many years, making it legally and practically unfeasible for non-owners.

You might be able to reach an agreement with your landlord, but it's ultimately up to them to decide whether to lease the PV system.

How does solar panel subscription work?

Let's delve into how it operates in practice:

1. The homeowner grants permission to the installation company to set up solar panels on his roof. Once the solar panels are installed, the ownership of the system is transferred to the company.

2. In this arrangement, the solar company, as the owner, takes responsibility for installing and maintaining the system to ensure it operates properly. 

3. The homeowner maintains ownership of the energy generated by the PV system. He compensates the company for maintenance services through monthly payments outlined in the subscription agreement.

4. After a fixed period of time (20 years, normally), the homeowner can either buy the PV system or have it removed.

Due to the diversity of terms and conditions among different providers, we strongly recommend that potential clients thoroughly scrutinise the specifics of any contract before making a decision.

What is the difference between solar panel leasing and subscription?

In historical contexts within the UK, solar panel leasing once involved the following arrangement: leasing out one's roof space to a solar panel provider. Traditional leasing agreements typically entail the return of the leased item, which poses challenges when applied to solar panels affixed to rooftops—an integral part of a household's energy infrastructure. In Europe, particularly within the EU, the term "leasing panels" has evolved into a more modern concept: subscription. 

Here, the focus shifts from asset relinquishment to ongoing service provision. You maintain the flexibility to buy the entire system outright at any time —making it an appealing choice for those keen to utilise solar energy without a substantial financial outlay upfront. If you're interested in delving deeper into this option, we suggest reading the following article where we discuss solar panel subscriptions in much greater detail.

How much does it cost to subscribe to or to lease solar panels?

In both cases the cost will vary depending on the type of solar panels you have installed, the monthly payments you make, and how much these payments increase over the length of the fixed term.

Often, the total cost of leasing solar panels will be more than if you’d bought them upfront. However, many people find the monthly payments more manageable.

You won’t have to pay for maintenance, as this is the responsibility of the company.

The pros and cons of leasing solar panels

Pros

• Leasing allows people who want solar energy but can’t buy the panels outright a chance to use the technology.
• No upfront costs, as you don’t have to buy the solar panel system.
• You can save on the cost of electricity, as you won’t rely on the grid so much once the solar panels have been installed.
• Your carbon footprint will be lower, as you’re reducing your use of fossil fuels.
• You don’t need to worry about maintenance, as the solar panel company is responsible for looking after the system.
• Using solar panels can improve your property’s Energy Performance Certificate (EPC). This can help to sell it if you decide to move.
• You can buy the system if you wish to.

Cons

• In general, the product's cost is higher due to interest payments, though this is standard practice since you don't need to pay upfront for your solar panel installation.
• Late or missed payments could have an adverse effect on your credit score.

The pros and cons of a solar panel subscription

Pros

• An opportunity for individuals interested in solar energy but unable to make an outright purchase.
• There are no initial expenses, as there's no requirement to purchase the solar panel system.
• You can reduce electricity expenses by relying less on the grid.
• Maintenance costs are not a concern, as the solar panel company takes responsibility for system upkeep.
• At the end of subscription, you own the PV system.
• You have the option to purchase the system outright if desired.

Cons

• Same as in case of leasing.

Buying or selling a property with a solar panel lease

The process of purchasing or selling a home equipped with a solar panel lease comes with its own set of considerations, which, although intricate, can streamline the transaction process. 

Here's why:

• Financial flexibility: opting for a solar panel lease allows homeowners to reap the benefits of renewable energy without the initial capital investment, potentially facilitating financing as mortgage lenders may view it favourably.
• Certification and insurance: lenders value the peace of mind offered by a certified installation company and an insured solar panel system that meets grid standards, safeguarding the property's value.
• Transferability of the lease: in many instances, the solar panel lease can be transferred to the new owner, making the process accessible for both parties.
• Transparency: comprehensive lease agreements offer clarity on terms, such as panel removal and associated fees, reducing ambiguity for buyers and sellers alike.
• Options for lease termination: while certain leases may impose constraints, there are avenues available for buyers and sellers seeking to terminate the lease prematurely, potentially alleviating them from long-term financial obligations.
• Appealing features: the presence of solar panels can enhance the property's value, making it an enticing purchase for prospective buyers despite the lease terms.

However, as each scenario differs, it's crucial to thoroughly review the lease details so that both buyers and sellers are fully informed about all terms and conditions.

Important disclaimer: at Otovo we offer only a subscription option, we do not offer solar panel leasing.

Buying or selling a property with a solar panel subscription

When buying or selling a property with a solar panel subscription, the process is essentially the same as with solar panel leasing. However, with a subscription from Otovo, it's worth noting that there's an option to purchase the PV system at any time, which could be beneficial in certain circumstances

Ending a solar panel leasing agreement

The process by which you end a solar panel lease agreement can vary depending on the terms. Generally, there are three main options.

1. You pay the outstanding balance on the lease agreement, therefore buying out the solar company. Some agreements specify that you must wait a specific period of time before doing this. Once you’ve paid, you can choose whether or not to keep the solar panels on your property.
   
   
2. A third party is brought in to assess the fair market value of your solar panel system, looking at factors such as how long it’s been active and the current value of similar products. You can then buy the system at this price.
   
   
3. If you’re selling the property you may be able to transfer the lease to the new homeowner. This requires extra paperwork and costs. Some buyers may be willing to accept this if you reduce the asking price of the property by the cost of the transfer fee.
   

It’s important to assess your financial situation and energy needs when considering solar panel leasing. While solar panels are undoubtedly an excellent way to power your home using renewable energy, a lease is a big commitment. Do your research so you can make an informed decision on whether leasing or buying a solar panel system is the right choice for you. If you are considering other options, we recommend reading our article about different ways to finance your solar panel installation. And please don’t hesitate to get in touch with us at Otovo if you have any questions.

Please note that at Otovo we offer only a subscription option, we do not offer solar panel leasing.

Ending a solar panel subscription

Ending a solar panel subscription gives you the option to terminate it earlier. However, you should consider the following scenarios:

• Purchasing the PV system outright, which would make you the owner of the solar system.
• If you choose not to purchase the system, you may be required to pay a cancellation fee or other charges, depending on your specific agreement.

Disclaimer: Otovo Limited is an appointed representative of Product Partnerships Limited which is authorised and regulated by the Financial Conduct Authority.Product Partnerships Limited's FCA registration number is 626349 and its address is Suite D2 Joseph’s Well, Hanover Walk, Leeds LS3 1AB. Product Partnerships Limited’s permitted business is to act as a Principal for a network of Appointed Representatives who arrange regulated credit facilities for customers who are purchasing goods from them.

Otovo Limited acts as a credit broker not a lender. We will introduce you to a small panel of lenders who may be able to offer you finance facilities for your purchase. We do not receive any commission for introducing customers to any lenders. You may be able to obtain finance for your purchase from other lenders and you are encouraged to seek alternative quotations. If you would like to know how we handle complaints, please ask for a copy of our complaints handling process. You can also find information about referring a complaint to the Financial Ombudsman Service (FOS) at financial-ombudsman.org.uk