Should I Buy Or Lease Solar Panels
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Whether you buy a system or lease it, going solar is one of the best ways you as a homeowner can save on energy bills and use renewable energy to power your home. That said, the financing option you choose influences a number of factors, including the costs, maintenance responsibilities, terms, savings, and the return on investment (ROI) of your solar panel system. Going solar can be an expensive proposition, with the average solar panel installation upfront cost ranging from $17,538 to $23,458 so financing may be the best option for you instead of paying in cash.
The main distinction between buying and leasing a solar photovoltaic system comes down to ownership: if you buy a solar panel system, you own it, either outright (if purchasing with cash) or after repaying your solar loan. On the other hand, if you lease the system or sign a power purchase agreement (PPA), a third party owns the equipment on your roof.
Before doing anything else, you should ensure that your home can accommodate solar panels. This involves doing research into the financial benefits of going solar, examining your property itself to see if it can fit solar panels, and looking into local taxes and incentives.
There are many different options on how to pay for your installation such as leases or buying the system outright. In the article below, we will explore more of what each option means and the steps you should consider before deciding on how to pay.
What manufacturer to buy your solar panels from is also another important consideration no matter how you eventually purchase them. According to our article, Panasonic, REC, and Sunpower are widely considered to be some of the top solar panel companies. Canadian Solar is another top manufacturer.
There are many product options available for those looking to install solar panels themselves or have an off-grid system. While this may seem like a strong option to reap the same benefits of home solar panels as those who use professionals, it has many drawbacks associated. Using a professional installer means that each installer is licensed and qualified. They will have a strong understanding of local financial incentives as well, giving you peace of mind that not only will you be saving the most money possible when going solar, and you will also be ensuring that your solar system is efficient and actually effective.
The steep up-front costs for a residential solar system can make a leasing company's sales pitch sound pretty appealing: Pay little or nothing and save hundreds of dollars per year on average. (The premise is that you save because the combination of your lease payment and your electric bill is less than what you currently pay for power.) Leasing can also look seductively simple compared with buying: There's no need to shop separately for an installer and financing; you just sign on the dotted line. So it's not surprising that 72 percent of the people who installed residential solar systems in 2014 did so through leasing or another type of third-party arrangement. But the reality is not quite so sunny.
Your Savings Will Be ModestPeople who lease their solar systems save far less than those who buy them outright or with a loan (they also miss out on federal tax benefits and any local incentives). Many leases contain an escalator clause that can further reduce savings by increasing payments 3 percent per year. So if you're paying 12 cents per kilowatt-hour in year one, with a 3 percent escalator, you'll be paying 18.2 cents in year 15. That means that if the cost of energy doesn't rise as quickly as the contracted lease payments increase, your savings could evaporate.
That's what happened to Andrew and Nora Barber, who had to buy out the lease on the solar system on their Clovis, Calif., home after two prospective buyers were frightened away by it. \"I offered the solar company $16,000, which was the total of all the payments for the remainder of the contract,\" Andrew says. \"But $21,000 was the buyout price in the contract, and the company wouldn't budge.\"
Some solar leasing companies may offer to relocate their systems from one house to another. That could cost $500 for an initial audit and another $500 to transfer the panels, if the leasing company determines it can be done. You would also need approval from your utility and local landmarks commission or the condo or homeowner's association, if applicable. Plus the new house must be able to accommodate the old system.
Service Plans Don't Serve YouThough leasing companies tout their service plans, maintenance is a red herring. \"Generally, there's really no scenario where the maintenance plan is going to kick in,\" says Joshua Pearce, an engineering professor and solar expert at the Michigan Tech Open Sustainability Technology Lab. Equipment problems aren't covered by the maintenance plan, they're covered by the warranty. And if a storm destroys your panels, the damage may be covered by your homeowners insurance.
If you are interested in finding the best solar panels to power your home and help the environment, the sticker shock may give you second thoughts. However, there is another option: Leasing solar panels can allow you to switch to solar energy without the upfront investment.
Leasing solar panels makes the switch to solar energy more attainable for customers who may not have the cash reserves required for the upfront investment in solar panels. However, unlike buying solar panels, or using a payment plan toward the purchase of solar panels, leasing solar panels means you do not own them. Rather, a third party owns the equipment.
On average, leasing solar panels will cost between $50 and $250 per month. This cost is determined by multiple factors, i.e., how much energy you use, the company, your location and your credit score. Plus, some solar companies require a down payment, while others allow you to lease with a $0-down agreement. These costs should be considered when determining if you should lease a solar panel system.
There are a few ways to look at the payment options available for buying or leasing solar panels. In considering these options, the biggest factor may be how long you plan to stay in the home and what money you have available to invest in the solar panels.
On average, solar loans last about 20 years, although some are available for short periods of time. Considering the average payback period for people who own solar panels is seven to 10 years, owning is ultimately the better way to save money.
That means you will ultimately end up spending more than the upfront cash rate for the solar panel. The difference between getting a solar loan and using a solar lease is that, with a loan, you own the system. If you are interested in a solar loan, you will need to shop around for the best rates and terms.
With a solar lease, you do not own the system and therefore do not qualify for government or private rebates or incentives for the solar panels. Depending on where you live, the cash-based incentives may be significant enough to make purchasing solar panels a much better option.
Although solar panels in general add value to a home, a home with leased solar panels can complicate a real estate transaction. If the panels cannot be moved, or the lease cannot be transferred to the new owner (either because they are disinterested or the lease originator will not agree), then you may have to pay more to break the contract. Advertisement THIS IS AN ADVERTISEMENT AND NOT EDITORIAL CONTENT. Please note that we do receive compensation for any products you buy or sign up to via this advertisement, and that compensation impacts the ranking and placement of any offers listed herein. We do not present information about every offer available. The information and savings numbers depicted above are for demonstration purposes only, and your results may vary. Compare Quotes From Top-rated Solar Panel Installers
Depending on the terms of the solar lease, you may be able to get solar panels up and running on your home for little to no money down. Although you will continue to make payments throughout the term of the lease, you will also save money through your utility bill.
Whether you use cash or a private loan for solar panels, the amount you have to pay to own solar panels is not insignificant. If you do not have the available funds for a cash purchase, then you will pay more over the life of a loan in interest.
Based on the Investment Tax Credit, also known as the federal solar tax credit, you can deduct 26% of the cost of installing solar panels on your home from your federal taxes if you own the system. This credit is guaranteed through 2022.
Depending on your state, you may or may not be eligible for a tax credit for the purchase of solar panels. Because cash incentives are one of the biggest benefits of purchasing solar panels, then leasing may have an advantage if your state does not offer a tax credit.
When you lease solar panels, you get the benefits of reducing your utility bills and helping the environment without dramatically affecting your savings at one time. Depending on the lease program and terms, you may be able to buy the solar panels at the end of the agreement.Best Solar Companies By States And Cities
Owning or leasing solar panels both allow homeowners to enjoy utility bill savings while helping the environment. Leasing is better if you want to get started with solar without a large initial investment while owning is the best way to save money long-term.
Fixed monthly solar leases are pretty straightforward. The solar company installs a system on your roof, and instead of paying your utility bill, you make a lower monthly lease payment on the solar system.
However, like the fixed monthly solar lease, PPAs typically include escalators that increase the price each year. While you save money upfront, the long term savings is less than purchasing a solar system. You also run the risk of having the PPA escalator outpace the rise in utility electricity prices. 59ce067264