Path-Q Solar

How should the price and timing of a lease buyout option be included when comparing leasing solar with owning it?

Answer

Treat the buyout as a dated cash outflow in the lease scenario and compare it with the full ownership cash-flow path. Model each permitted buyout date, the applicable price formula, lease payments before and after buyout, and any transfer or removal costs.

Key points

  • A future buyout price should be discounted to present value rather than compared at face value.
  • Include lease payments, escalators, maintenance responsibilities, and buyout financing.
  • Check whether ownership after buyout changes warranty, performance, or service obligations.
  • Compare the lease with ownership over the same horizon and under the same production and bill-savings assumptions.

What it depends on

  • Contractual buyout schedule
  • Lease payment escalation and remaining term
  • Financing cost for the buyout
  • Transfer, service, and equipment condition provisions

Risks and trade-offs

  • A low early payment can conceal a large future buyout.
  • The buyout option may be unavailable or priced differently at different times.
  • Ownership may create greater maintenance responsibility but more control over future savings.

Information you may need

  • Complete lease and buyout schedule
  • Payment escalation and service terms
  • Expected ownership period
  • Financing assumptions for any buyout

Your next step

What to do next

Build side-by-side cash flows for leasing without buyout, buying out at each available date, and owning from the start.

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