A solar lease can help you avoid hefty up front installation costs and enable you to benefit from energy savings sooner. However, it can also negatively i mpact solar incentive savings and home value. We researched the pros and cons of solar leasing and how it compares to other financing options so Contact online >>
A solar lease can help you avoid hefty up front installation costs and enable you to benefit from energy savings sooner. However, it can also negatively i mpact solar incentive savings and home value. We researched the pros and cons of solar leasing and how it compares to other financing options so you can deci de if a solar lease is right for you.
Deciding whether to lease or buy solar panels? Our guide covers the key differences, pros, and cons of leasing versus buying to help you make the best decision.
Pros of solar leases. The three main advantages of a solar lease are: Saving money on electricity: With a solar lease, you''ll save on electricity costs throughout your agreement. Low or no upfront costs: Unlike a cash purchase, solar leasing setups allow you to go solar without paying much (if any) money upfront.
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Installing a home solar system is a smart long-term investment, and it''s usually best to purchase your solar panel system rather than lease it. There are very few situations in which it will make more financial sense to lease solar panels than buy them outright or take out a solar loan.
Whether you take out a loan or sign a lease, going solar is a smart move because it saves you tens of thousands of dollars on your electric bill no matter how you choose to pay for your system. If you take out a solar loan there are more benefits than a lease because you own the system. Owning the system can increase the value of your home, attract more buyers, and help you sell your home at a higher price point.
Purchasing a new solar system outright with cash is by far the best way to reap the most financial rewards from your investment. However, the average homeowner may pause at the upfront cost – which is typically as much as $20,000 or $30,000 before tax incentives and rebates. If you have to decide whether to lease your system or purchase it with a solar loan, the majority of the time it makes the most sense to pay off your system with a solar loan because you own it outright at the end of your loan term. That''s not the case with a lease.
Down payments usually aren''t required for either solar loans or solar leases, so you''ll see immediate savings from both without having to make a significant cash expenditure.
Solar lease: After the first year of a solar lease, you''ll experience annual rate increases known as an escalator, which means that each year your monthly payments will be higher. That''s because your leasing company will typically raise your per kWh cost around 2-3% each year, which means you lose out on stable electricity costs, one of the benefits that makes solar panels so financially appealing.
Solar loan: Annual rate increases aren''t written into solar loans. If you take out a solar loan, your monthly payments are fixed for the entirety of your loan term and remain consistent. There are two types of solar loans - secured and unsecured - which we''ll explain in more detail below.
Another less common option is a prepaid or custom down payment lease or PPA – but it requires spending money out-of-pocket. We don''t generally recommend this option, even though it can result in lower monthly costs.
Solar loan: When you buy or take out a loan for a solar panel system, you''re eligible for the federal solar investment tax credit (ITC), which allows you to receive a tax credit equal to 30% of the total cost of your system, reducing the expense of going solar by thousands of dollars. Plus, many states have local rebates and incentives that provide additional savings.
Solar lease: One of the major downsides to a solar lease is that the valuable federal solar tax credit and other state incentives typically go to the system''s owner – which is the leasing company, not you – so you''ll never see those thousands of dollars. In contrast, if you finance with a solar loan, you directly benefit from the financial incentives, which means saving yourself the thousands of dollars you lose out on with a lease.
Solar energy systems generally require little maintenance over their lifetimes. However, in the rare cases that they do, the responsibility typically falls on the system owner if your solar panels need care.
Solar loan: If you take out a solar loan to purchase your system, you''re responsible for its maintenance, but you should be covered by your equipment manufacturer''s warranty, which typically lasts anywhere from 10-30 years. Plus, your solar installers should also provide a workmanship warranty.
Solar lease: Solar lease and PPA applications can often be approved and signed in a single meeting, but as with any major financial commitment, it''s wise to do additional research and think through the decision before committing on the same day.
Solar loan: In comparison, solar loans can take longer to approve because they require additional administrative steps like home appraisals that may take a few weeks.
While lenders offer solar loans in all 50 states, some states don''t permit solar leases and PPAs for residential solar panel systems. As of now, at least 28 states and Washington, D.C. authorize or allow solar PPAs.
Studies show that homes with solar panel systems sell at prices more than 4% higher on average than homes without solar, as well as selling faster. However, that price bump only applies when you''ve purchased the system rather than leased it. Trying to sell a home with a leased solar system attached can cause headaches and even turn buyers off in some cases. Many prospective buyers don''t want to take on a lease because it requires making payments on a system they won''t own at the end of the agreement, and the panels are removed from the house once the contract ends.
Researchers have found that potential homebuyers are willing to pay more for homes with customer-owned solar. Homes with an average size solar system sold for a premium of $15,000 across different states, according to a Lawrence Berkeley National Laboratory study. Even if you still have to pay off the rest of your solar loan, the increase in the sale value of your home can help offset or cover your loan amount.
If you finance your solar panel system with an unsecured loan, the loan is not tied to your property, so you can sell your house before you''ve paid off the loan in full. Keep in mind, that means you''ll still be making payments for a solar system attached to a house you no longer live in. However, you can avoid that scenario by using some of the proceeds from the sale of your house to pay off the remainder of your solar loan.
Buy out the remainder of the lease: When buying out your lease, you can either have the panels removed from your roof or keep them there and sell the system as part of the property. Many leaseholders find that they owe additional fees or penalties when buying out their solar leases, which is why it''s crucial to read the fine print carefully when you sign your original contract.
About Pros and cons of leasing solar panels
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