Should You Buy or Lease Your Solar Power System?
Whether you buy or lease your solar power system, residential solar panels are a great way to save money on electricity. Your energy costs will be lowered either way, but the decision to buy or lease your solar power system can depend on your financial situation, needs, state financial incentives, and other factors.
Buying Your Solar Power System
If you buy your solar power system, you’ll either pay for the system outright (not common) or finance your solar panel installation with a loan (more common). This is a smart way to maximize financial incentives and benefits, but buying a solar power system isn’t for everyone.
Pros of Buying Your Solar Power System
- All financial incentives are available: If you’re paying for your solar power system, you’ll be able to claim all of the financial incentives available in your state. That may include rebates, tax breaks, net metering, and more. This can make a huge difference in how much you save with your solar power system, ranging from hundreds to thousands annually.
- Financial benefits are maximized: Buying your solar power system means you’ll enjoy the lowest cost for power in the long term. Once your solar power system is paid off, you’ll enjoy free energy, unlike a lease, which you’ll continue to pay for the remainder of the agreement. Depending on your state policies, energy production and consumption, and the cost of electricity, you could get a decade or more of free electricity out of the life of 25 year solar panels.
- You can take advantage of low cost loans: Under the Property Assessed Clean Energy (PACE) program, you can take out a loan with low interest rates that is tied to your property, spread out over several years on your property tax bill. In some cases, there are income tax advantages for this type of loan.
Cons of Buying Your Solar Power System
- Solar power systems are expensive: Few home owners have the cash on hand to invest in a solar power system without a loan, and others may be too nervous to take on a solar power loan.
- May be responsible for long term maintenance and insurance: Unless you have a maintenance contract with installer, it’s up to you to make sure your solar panels are taken care of with insurance, maintenance, and more. If they require repairs, you’ll have to pay for them. However, it’s important to note that solar panels require little to no maintenance.
- Red tape: Claiming all of those valuable financial incentives may or may not be easy. It depends on your state and how streamlined their systems are, but you could be dealing with a lot of unattractive paperwork. However, solar power system installers are likely to help walk you through the process of claiming financial incentives.
Who Should Buy a Solar Power System?
- Home owners with cash on hand: If you have the money and you’re willing to make a lump sum investment in solar power, buying is a good option for you.
- Home owners with good credit: Even if you don’t have the cash, your credit can make up the difference. With good credit, you can get a low cost loan that will allow you to enjoy the benefits of solar power savings and financial incentives without a large initial investment.
- Home owners looking to sell: If you’re planning to sell your current home within the next few years, buying is a smart option. A solar power system will increase the value of your home.
- Home owners planning to settle down: Though it’s a good idea to buy solar power if you’re selling, it’s also smart if you plan to stay a while. If you own your home for the life of the solar panels, you’re likely to enjoy several years of free electricity once they’re paid off.
- Home owners in states with strong financial incentives: State financial incentives can be highly valuable, knocking off a significant portion of the cost of your solar power system installation. If your state has particularly good solar incentives, it would be wise to buy your system in order to take advantage of them.
Leasing Your Solar Power System
Leasing solar power systems is an attractive option for many home owners. With a solar power system lease, you’ll pay monthly for your solar power, just like a utility bill, but with lower costs. Leasing, also known as a solar power purchase agreement, offers a quick way to take advantage of the benefits of solar energy with little to no upfront costs and immediate savings. You’ll also avoid the upkeep associated with a solar power system. But you likely won’t get to claim any financial incentives, such as tax breaks.
Pros of Leasing Your Solar Power System
- Easy to get started: Leasing a solar power system is often as easy as signing a contract and watching installers go to work on your roof. Minimal paperwork and hassle, and you’re on your way to enjoying solar power and its savings. You’ll pay for solar power monthly just like a utility bill, so not much will change except your savings.
- Immediate savings: Solar power system owners may wait for years to reach a break even point, but solar lease customers will likely see a reduction in overall energy costs immediately.
- Little to no upfront costs: Some solar power installers offer $0 installations. Others offer other low cost options, making it easy for home owners to get solar power savings without a large investment up front.
- Leasing upgrades: At the end of your lease term, you’ll likely have the options to upgrade, extend your agreement, or even purchase the system outright.
- No risk or maintenance: Solar power lease agreements typically include insurance and maintenance. Your solar power leasing company will take care of monitoring, repairs, maintenance, and more.
Cons of Leasing Your Solar Power System
- Not all financial incentives may be available: Overwhelmingly, residential solar power system financial incentives such as tax break and rebates will go to the owner of the system. That means if you’re leasing, you’re not likely to get these benefits. Instead, they’ll go to the company you’re leasing from.
- Leasing is not available in all states: Leasing may or may not be an option in your state, depending on state policies.
- You’ll never have truly free electricity: When you buy your solar power system, you will eventually pay it off and reach a point when you’re simply enjoying free electricity. The same is not true for leasing, which requires you to continue to make payments even after you’ve paid the equivalent of the cost of the system and installation.
Who Should Lease a Solar Power System?
- Home owners in states with few financial incentives: Claiming solar power financial incentives is a big consideration, but if your state offers little support for solar home owners, that may not matter much to you, making solar leasing more attractive.
- Home owners with little cash or credit on hand: If you don’t have the cash to pay for a solar power system and don’t have good credit or desire a loan, leasing is a good alternative.
- Home owners interested in immediate cost saving benefits: Unlike buying, when you’ll need to reach a break even point, leasing allows you to save money on your energy costs from day one.
- Home owners who do not want long term maintenance of a solar power system: Solar power system lease agreements typically come with service, maintenance, and even insurance. That means the upkeep of the system is out of your hands and an issue for the solar power company to worry about, not you.
Is buying or leasing a residential solar power system the right choice for you? Consider the pros and cons above, and contact a solar power system installer in your state to consider your particular options.
Photo by Flickr user nait