A Lexington homeowner weighs a 25-year solar lease against cash

Illustrative scenario: a composite built to show our method. Names, places and figures are hypothetical.

The Marlowes live in a 2,500-square-foot house in south Lexington, in KU territory, and use about 12,600 kWh a year. They held two offers for the same 8.4 kW rooftop system: a 25-year lease at $129 a month with a 2.9% annual escalator, and a cash quote of $24,780. The installer also offered a loan. This solar lease vs cash example compares all three on one set of assumptions. The short answer: the lease looked like a wash in year one and cost about $20,700 more than it saved over 25 years.

One input is real: KU’s NMS-2 export credit of 7.534¢ per kWh, which the PSC left unchanged in its 2026 rate orders.

What the lease proposal claimed

The proposal estimated 11,340 kWh in the first year and valued every one at a 13.5¢ retail rate, with utility rates rising 5% a year. On those assumptions, year-one savings ($1,531) matched year-one lease payments ($1,548) almost exactly, and the lease came out $12,289 ahead over 25 years.

Rerunning the solar lease vs cash example on one method

We used the same method as our ownership comparison tool:

• Production: 10,500 kWh in year one, from the proposal’s own tilt, orientation and shading data run through a standard public production model.
• On-site share: 55%. Both adults work away from home on weekdays, and their heaviest use is in the evening.
• Avoidable rate: 13.5¢ per kWh, the energy charge plus per-kWh riders. The fixed monthly charge doesn’t change with solar, so it’s excluded.
• Export credit: KU’s 7.534¢, held flat.
• Other inputs: 3% annual rate increases, 0.5% annual degradation, a 5% discount rate, 25 years.

Change, applied in order	Lease net benefit	Effect
Proposal’s assumptions	+$12,289
45% of output exported at 7.534¢, not retail	−$9,251	−$21,540
10,500 kWh instead of 11,340	−$12,692	−$3,441
Rates rise 3% a year instead of 5%	−$20,740	−$8,047

The export credit did most of the damage. A template that assumes one-for-one net metering is wrong for any new KU customer.

Lease, cash and loan side by side

	Cash	Loan	Lease
Up front	$24,780	$0	$0
Year-one net cash flow	+$1,136	−$1,347	−$412
Total paid, 25 years	$24,780	$49,652	$55,704
Bill savings, 25 years	$34,964	$34,964	$34,964
Net benefit	+$10,184	−$14,688	−$20,740
NPV at 5%	−$5,904	−$12,062	−$10,354
Break-even	Year 19	Not within 25 years	Not within 25 years

Three things stood out:

• The escalator. $129 a month becomes $256 by year 25. To break even on our assumptions, this lease would need to start near $81 with the same escalator, or hold near $112 with none.
• The loan amount. The loan financed $28,900 for equipment that costs $24,780 in cash. A $4,120 gap, 16.6% above the cash price, is what a dealer fee looks like.
• Rankings flip in today’s dollars. In nominal totals the loan beats the lease. At a 5% discount rate the lease edges ahead, because its largest payments come last.

Cash wins on both measures, but thinly: an internal rate of return of about 2.6% a year. Whether that beats paying down debt or holding savings is the homeowners’ decision, and a question for a licensed financial adviser rather than for us.

The roof question

The shingles are 14 years old. Asphalt shingles commonly last around 20 to 30 years, so a re-roof inside a 25-year term is likely. Adding a hypothetical $3,500 detach-and-reset in year 10 cut the cash net benefit to $6,684 and moved break-even from year 19 to year 22. Under the lease, the contract decides who does that work and who pays. The proposal didn’t say.

What the homeowners decided to ask

They signed nothing. They sent these questions in writing:

1. Lease provider: What is the starting payment with a 0% escalator?
2. How many kWh do you assume we export, and at what credit? Please rerun the savings at KU’s NMS-2 credit.
3. Please send the shading report and the model output behind 11,340 kWh.
4. Who removes and reinstalls the array for a roof replacement, at what price and on whose schedule?
5. What are the buyout prices by year, and what must a buyer do to take over the lease?
6. Does the price assume you claim a federal commercial credit, and does anything change if installation slips past the end of 2027?
7. How will KU enroll a third-party-owned system under NMS-2? Please send written confirmation.
8. Lender: What is the dealer fee in dollars, and is there a loan without one?
9. Roofer: How many years does this roof have left, and what would re-roofing first cost?

What would change the answer

A lower price per watt, more daytime use or faster rate increases. At 5% annual increases, the cash net benefit rises to $18,231, with break-even in year 17. At a 65% on-site share, it’s $13,153. Neither change turns the lease positive at $129 a month. Our red-flag checklist covers the same questions for your own proposal.