Solar Lease Vs Buy
Solar has reached critical mass, especially in sunny San Diego. Last year, nearly 195,000 solar installations were completed, with a new installation taking place every 2.5 minutes. And thanks to the Solar Investment Tax Credit, solar installation costs are more than 73 percent lower than they were in 2006.
Once you read up on some solar energy FAQs, we hope you’ll agree that going solar is practically a no-brainer. But one decision requires a bit more thought. Should you lease or buy? It all depends on what you hope to get out of your solar panel system.
Pros and Cons of Leasing Solar Panels
If all you want to do is save some money on your power bills and you’re not concerned with claiming the Solar Investment Tax Credit or selling extra power back to your utility company, you may want to explore a lease. But leasing does have its drawbacks, so you must be aware of the pros and cons.
Pro:You can lease a solar panel system for no money down, or for a relatively small upfront payment.
Pro: With a solar panel lease, you don’t have to worry about maintaining your solar panels—the leasing company takes care of that.
Of course, maintenance is minor and usually consists of simply hosing off the solar panels once in while and keeping trees trimmed so they don’t cast too much shade on your solar panels.
Pro: You’ll save money on your electricity bill—but not as much as you would if you purchased your solar panel system.
Con: You won’t qualify for the Solar Investment Tax Credit of 30 percent. Instead of getting a dollar-for-dollar tax credit of 30 percent of the amount you paid for your solar panels, you’re actually leaving money on the table and allowing the lease company to take the tax credit.
Con: You won’t reap the benefits of net metering. Net metering allows you to sell any excess energy that your solar panels produce back to your utility company at retail rates.
Con: Your lease payment will go up each year—and you’re locked into your lease for 20 years. One California homeowner who opted to purchase his solar panel system told MarketWatch that if he had leased his panels from Solar City, his monthly charges would have increased 2.9 percent each year.
And when your lease is up, you either have to renew the lease or remove the panels. Or, depending on the lease company, you may be able to purchase the panels at a discount. But after 20 years, do you really want to pay an extra fee for panels that may be starting to lose efficiency?
Con: A leased system can cause difficulties if you want to sell your home. Real estate broker Nicolas Jonville of the Jonville Team with Keller Williams Realty explains that when buyers plan to purchase a home with leased solar panels, they must qualify for the lease themselves. If the buyers have already maxed out their loan amount to buy the home, adding in the solar lease payments can push the home out of reach. And sellers who have leased solar panels are often disappointed to learn that unlike purchased systems, leased systems don’t actually add much value to their home.
While Jonville has extensive expertise in handling real estate transactions that include solar panels—both leased and owned—not all agents are so experienced. He cautions buyers and sellers to do their homework upfront and choose an agent who can guide them through the transaction. He says that leased solar panel systems can lead to delays and acrimony and can even cause a transaction to fall out of escrow if not handled properly.
“In most cases, you can’t just call the solar lease company and ask for the solar panels to be removed,” Jonville says. “It’s like leasing a car—there are usually penalties for ending the lease early.”
Pros and Cons of Buying Solar Panels
If you want to maximize the value of your solar panel system by taking advantage of the Solar Investment Tax Credit and net metering from your utility, purchasing solar panels is your best option. The major drawback? Price. Luckily, financing programs can help out.
Pro: Solar panels are reliable, need very little maintenance, and generally come with extensive warranties. At RC Energy Solutions, we work with solar panel manufacturers that offer the best warranties in the industry. The solar panels themselves often have a 25-year warranty, while the solar inverters usually come with 10- to 25-year warranties. While solar panels do lose some efficiency as they age, it’s highly unlikely that the panels will conk out entirely during your lifetime.
Pro: You’ll save money on your electricity bill. And you’ll save even more than you would with a solar lease. The homeowner who spoke with MarketWatch calculated that with his upfront payment, electricity from his solar panels would cost about 6 cents per kilowatt hour, compared with the 30 cents per kilowatt hour that PG&E was charging him—and the 15 cents per kilowatt hour he’d pay with a solar lease.
Pro: When you purchase your solar panel system, you can qualify for a federal Solar Investment Tax Credit of 30 percent of the purchase price of your system. So, if you pay $35,000 for your system, you’ll get a credit of $10,500. Essentially, the government is thanking you for going solar by reducing the price of your solar system by 30 percent, and you claim that credit on IRS Form 5695 at tax time.
Pro: If you decide to finance your solar panel system, you’ll own it outright once the loan is paid off. Savings on your electricity bill will continue for the life of the system.
Pro: You can earn additional credits on your utility bill through net metering. With net metering, utility companies buy back the excess energy produced by your solar panel system at retail rates. However, utility companies are lobbying to reduce the rates they pay for this power, so there’s no time like the present to start your solar panel system!
Pro: Financing options are available to allow you to start your solar project with little to no out-of-pocket costs. You’ll start saving on electricity right away, and your payments won’t start until after the system is complete.
Pro: When you own your solar system, you add value to your home. According to Jonville, the real estate broker, savvy buyers will pay a premium for a solar panel system that’s owned outright. “If the system is owned free and clear, it’s not an exact number, but appraisers usually add 50 cents on the dollar for the solar system. So, if someone spent $30,000 on a solar panel system, the appraiser might add $15,000 in value to their home.”
However, Jonville urges homeowners to keep in mind that there are no set rules when it comes to appraising solar systems—that’s just been his experience. He also cautions that many agents don’t understand how solar panel systems work or the value they add to the property. So, whether you have a leased system or you own your system outright, if you plan to sell your home, you must seek out an agent who has specific experience with solar panels.
Con: Purchasing a solar panel system can be expensive. If you buy the system outright, you’re likely to pay in the neighborhood of $35,000 for your system—that was the approximate cost of a four-kilowatt residential system back in 2011, according to GoSolar California. But thanks to the Solar Investment Tax Credit and the ability to sell excess power back under net metering, you can recoup your investment quickly.
If you don’t happen to have tens of thousands of dollars lying around, don’t fret. You can finance your solar panel system, which is often still a better deal than leasing. And there are financing options available to get you started with little to no money down.
We at RC Energy Solutions would be happy to walk you through your financing options.
Should You Buy Or Lease Solar Panels: Here’s The Bottom Line
Whether you decide to buy or lease, assess your options carefully and get quotes from several companies.
RC Energy Solutions offers a free in-home consultation to help you assess your options and answer any questions you may have. And if you plan on selling your home in the next several years, we can arrange for you to speak an experienced Realtor who will help you understand how leasing vs. buying your system may affect your home sale prospects.
Contact us today for your hassle-free consultation.