John, the decision to lease or buy solar panels is determined primarily by your financial goals, length of time you will live in the home for pay-back-period consideration, and if you can take advantage of this year’s federal tax incentives. If you decide to pay cash out of a savings account make sure the return on your investment is favorable. In recent years, advantages out way the disadvantages for paying cash for a solar system as the cost for solar systems have declined. Also John, check into your local county Property Assessment Clean Energy (PACE) program. These have additional advantages and the interest is tax deductible. I tell my clients, pay yourself first not the local utility company as the first step towards financial independence. I seldom suggest a PPA or Lease when cash, PACE, or cash loan is an option.
Why choose a solar purchase loan?
You want to own your solar energy system
You want free energy once the system is paid off
You want to keep your money in the bank but want to start saving today
You want flexible payment options and the option to pay off your loan with no prepayment penalties
You want to use available federal, state or local tax incentives today that will be declining in value in the future.
Why Choose a Lease or PPA?
You want to start saving from day one
You want to have the system installed for free
You want to lock in your energy rate for the next 20 years
You want to choose between several flexible payment terms
You want a system that’s fully insured and warrantied for 20 - 30 years
You don’t qualify for federal, state or local tax incentives or other rebates
Disadvantages include high annual escalation in rates and new buyer will have to qualify for new lease or assume if you sell your home.
Monthly Lease or PPA Option
You do not own the equipment and would either pay nothing or very little up front to have the solar panels and system installed on your home. You would immediately begin saving each month, and the system would be insured and maintained for the entire length of your lease agreement.
I am leasing my panels… and I’m very happy with the results… saving at least $30 per month, and sometimes more depending on sun/clouds, and usage. With leasing, I got FREE install… and I buy the power at a cheaper rate… they handle all maintenance… And I get to keep the $30,000 in my pocket to invest in other more profitable ventures.
Lots of details at ww.CopeHomeRepairs.com/Solar - Feel free to complete the form, and someone will call you to answer questions, and give you a rough idea what might be possible on your roof, both Leasing, and Purchasing.
We highly recommend buying or financing your solar panels instead of leasing them.
Leases can create a lot of issues for the customers involved in them. The system isn’t owned, which means it isn’t yours to sell if you want to put your home on the market. In order to sell your home, your buyer has to be approved by the solar leasing company to ensure they can afford the payments. This deters buyers and can make offers fall through. Often, there are charges for canceling or transferring the contract.
It’s a completely different story when the solar systems are bought. They can be financed for the same affordable month-to-month payment structure. Your monthly rate is always the same and less than your current average bill, so savings start right away. The system is typically paid off in the same period of time. It also pays for the up front costs like installation. Instead of having to renew or purchase at the end of the contract, you’ve already paid off what you have, no extra charges.
If you plan to sell your home before then, the increased value of your home will pay off the rest of your system. Solar adds, on average, $20 of home value per $1 in energy savings in the first year. That means, a first year savings of $2,000 adds $40,000 in home value. This can be used to pay off the solar system at closing. There are no middle-men to deter potential buyers.
The best starting point for this would be to consult your tax adviser. They will be able to tell you if you can utilize the 30% Federal Tax Credit or not.
In general however, it is much more advantageous to own solar than to lease it. When you own the solar panels and equipment, you get whatever utility rebates are available, the 30% Federal Tax Credit, and the cheapest electricity, your own. When you purchase the solar system, it transfers with the sale of your home as well. If you can benefit from the 30% FTC, I do not see a downside to purchasing your own equipment.
Leasing on the other hand allows you to take advantage of having solar at a relatively fixed rate. Most leases have an annual escalator of 2.9% with a 20-30 year term. If you were to sell your home, the new owner would have to not only qualify for the monthly payment, but would also have to AGREE to leasing it. If they do not, you either find another buyer, or have to pay off the lease for whatever the leasing company tells you its worth.
There are many more pros and cons to each, but I have found these to be the most pertinent reasons.
My opinion, do not lease unless you absolutely have no other option.
Buying solar:
Monthly energy savings: Homeowner receives all energy credits
Tax credits and incentives: Homeowner receives all rebates and credits
Upfront installation costs: Homeowner pays all but can roll into mortgage or credit line for positive cash flow in first year
Home value: Home value increases by $20,000 for each $1,000 offset in annual electricity cost
Leasing solar:
Monthly energy savings: Leasing company receives majority of credits
Tax credits and incentives: Homeowner receives no rebates or credits
Upfront installation costs: Low or no upfront costs
Home value: Value of home does not change and new homeowner must negotiate new lease terms
