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To lease or not to lease? For some in the market for renewable energy alternatives, the question may not be so clear – especially for those who aren't aware of their options. For greater clarity, we reached out to Ryan Magee, Renewable Program Manager with Canadian Energy and a rep with the company's Go Long Run solar leasing program.

Are prospective buyers aware of their leasing options when it comes to solar equipment?

Generally, people are aware they can lease but don't really understand the difference between leasing and financing. More so, they recognize that they're going to pay the same amount of money every month, but they don't see the distinctions between the two options, which are pretty significant.

What are those distinctions?

There are some big differences from an ownership standpoint. If you go the financing route, you completely own the equipment and assume any maintenance costs and depreciation that come along with it. It's the same thing if you own a car; if you finance it, you own it outright and can't go back to the dealership and replace it with a newer model once it begins showing its age. With leasing, however, you have that flexibility to upgrade to a newer model by adjusting the terms of your lease. You can also have that same option of paying it off completely any time after you enter a leasing agreement.

What does that mean from an accounting perspective?

When you lease, that's considered an operating expense; whereas if you finance, it's a capital expense. You're going to have that equipment expense on your books either way, but you can write-off an operating expense 100% whereas it's a bit harder to do if it's a capital expense.

Are there different leasing options?

Certainly, there are different options when it comes to leasing based on the structure you want it. One is to put down a percentage of the equipment cost upfront to get greater equity in that asset. Another is to do what's called a “back-end residual”, whereby you can reduce your monthly payments and essentially defer those costs to the “back-end”. There's definitely flexibility.

Would you say awareness around these kinds of leasing programs is growing?

I think it is, but there's still a bit of a stigma out there around leasing solar equipment in general because there are people who tried it in the past and didn't have a great experience. What typically happened is clients would rent the roof of someone's home or building and basically pay them the portion of revenue that the system generated. So from a building or residential standpoint, they didn't own the system, they were just getting revenue from it. That's not ideal for businesses because anything that's revenue has to be put down on their balance sheets as revenue, and that affects their tax.

Then there were homeowners who rented their property to solar to start generating income. That income would go towards their year-over-year income tax, which could push them into the next tax bracket. Again, that wasn't ideal.

So, yes, I would say people are recognizing they can lease, but some of them had negative experiences and are still reluctant to do so again.

What about those who have the money and can afford a system outright?

If you have that money, I'd say go for it as long as you can find a way to hide that in your balance sheet or financial statement. But then, if you have that money upfront, there's also a consideration to be made for using it somewhere else where you're going to get a better return on their investment. What I mean by that is why not take that money and invest it into a product or service that's going to bring more money through the door, and then lease the system at the low rate? If the math works out, that's would generate the best value.

Ryan Magee is a Renewable Program Manager with Canadian Energy and Go Long Run. For more, visit www.cdnrg.com.

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