A Young Persons Guide To Solar Panel Ownership
If you are ruminating on leasing vs buying solar panels, consider this scenario: You are twenty-seven years old and making $30,000 at your first job out of college. It will take you twenty years to pay off the loan for your solar panels.
But you can pay back that loan, at least in part, with the money you would have to pay for lights, heat, and air-conditioning.
You may be making the final payment on the solar panels when you are forty-seven. Now, you can take all the money you would otherwise send to the utility company and use that to help your kids pay for college.
As you get older and more sensitive to heat and cold, you will need more energy, but your utility costs will remain stable. The cost of utilities will keep rising, possibly out of proportion to rising salaries, but you will be banking the money you would otherwise have thrown at a heartless corporation.
When you retire, you may have somewhat less money to live on than when you were working. The fact that you are not paying a fifth of your income to a power company will help you live well on a combination of social security and other retirement funds.
Admittedly, buying solar panels involves greater responsibility. You will want to consider how long you plan to live in your current home and the condition of your roof before buying. You will want some system of tracking the efficiency of your panels. Here is a guide to help you decide how to replace your roof with solar panels.
Specific Benefits Of Leasing
Quick Tip: For those looking for immediate savings with no upfront costs.
- Go solar with nothing out-of-pocket, typically $0 down!
- See immediate savings by reducing your electricity costs by 30% 50%
- PPA and most leases are guaranteed to be fully transferrable
- Only a 2.9% annual increase in electricity costs vs. 4-6% from your utility company
Whats Better Leasing And Buying Your Solar Panels: Comparison
Solar panels can be purchased or leased, and each has its own set of benefits and drawbacks. Lets compare and contrast these two funding choices.
- Long-term savings
You will save money on your energy bill whether you lease or buy solar panels. However, if you buy the system outright, you will save a lot of money in the long run. Taking up a solar loan can also save you a lot more money in the long run than leasing solar panels.
When you buy solar panels, you pay for them upfront and dont have to worry about making monthly payments. A solar lease, on the other hand, binds you to monthly lease payments for 20 years or longer, depending on the period of the lease.
- Monthly payments
You get a solar lease or PPA when you lease solar panels. Some demand no money down, while others do, and your monthly cost will be determined by this.
Solar loans are normally paid down after a specified number of years, resulting in lower monthly payments, and will eventually be paid off, so the savings may be less.
- Tax credits and incentives
One of the major drawbacks of solar leasing is that you cant take advantage of some solar panel incentives, such as the federal investment tax credit, which can save you up to 26% on the entire cost of solar panel installation.
- Selling your home
- Solar installation and maintenance
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Why Leasing Isnt A Good Idea
When you lease solar panels, youre missing out on federal tax benefits and incentives, which reduce your overall expense. With a lease, youll be saving less compared to buying. Of course, leasing solar panels is tempting, because there isnt upfront money needed. But thats going to bite in the long run.
Even though buying solar panels seems very costly in the beginning, most states and local governments offer incentives that can cut up to 50 percent of your overall expense.
Worse, most solar power leases contain escalator classes, which can increase your annual payments by 3 percent. For example, if your lease payments are at 25 cents per KWh a year, a 3 percent escalator means youll be paying 37 cents per KWh after 15 years. Thats a yearly incremental of 3 percent.
If you own a home, and youll want to sell it in the future, leasing solar panels isnt a great idea. Leasing solar panels tend to scare off home buyers. No one wants to be stuck paying off leasing agencies without ever owning the solar panels.
The leading buyouts are always expensive. And thats only if the leasing agencies allow it. Some of them dont.
When you lease solar panels, you lose control of your roof. Since the panels belong to the leasing company, theyll be installing them in such a way that other neighbors can see so as to advertise their products. The installation will disregard your homes appearance.
Which Solar Financing Option Is Best For You: Leases Or Loans
No matter which solar financing approach you use, 2 things are guaranteed:
So you canât really lose either way.
However, leasing means you can go solar with $0 upfront. And this approach is a very attractive option for many â especially those on a tight budget. Leasing also appeals to homeowners who are wary about taking on debt.
But when you lease, you never truly âbreak even.â Youâre simply buying electricity from a cheaper source.
By contrast, purchasing your solar panels means that you actually own the system. And as such, your solar installation becomes an investment that pays for itself.
True solar ownership also means that:
- All relevant incentives and tax breaks come to you â the system owner. These lucrative subsidies can help speed up the payback period of your installation.
- The property value of your home can increase since future buyers will gladly pay a premium to acquire a solar-enabled residence.
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Should You Buy Or Lease Your Solar Panel System
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Should you buy or lease your solar panels? Its a tough decision that can influence your financial situation for years to come. Here we help you understand the comparison of leasing vs buying solar panels.
Where Does Your Wife Or Roommate Stand On Leasing Vs Buying Solar Panels
When you are debating leasing vs buying solar panels with the rest of your family or roommates, you will have to consider the wishes of the other people in your house.
Are they all on board with sharing the costs and the duties involved in maintenance? If we learned nothing else from Ed Begley, Jr., we do know that you have to scrub down your solar panels from time to time to keep them gleaming. And more importantly, working.
Is there no one in your house who wants to get on a ladder? If thats the case, leasing solar panels may be a better option than buying.
Similarly, if your wife or husband doesnt want the financial commitment of a purchase, then leasing solar panels may well be the appropriate compromise.
Do you want to undertake a twenty-year financial commitment with your roommate or roommates? Maybe, if you share core beliefs about your responsibility to lower your carbon footprints.
Quick test: What is your roommate doing right now? Drinking a beer while hanging out in his briefs? You dont want to sign another contract with that person. Consider leasing.
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How Can I Buy Solar Panels
There are two key reasons for the rise in solar panel installations over the past decade: the cost of the materials has decreased as panel efficiency has increased, and the U.S. government created the Solar Investment Tax Credit to encourage people to purchase solar panels.7 Thus, for everyone who wants to own their solar panels outright instead of leasing them, you have two choices:
Amazing Financing Options Available For Buying
The figure above, while significantly reduced might still seem like a bit much of an investment. However, what if we told you there is a way to still get these savings and pay no money out of pocket? This is an absolute possibility with the New York State-Sponsored loan through EFS.
With an interest rate of just 3.49% with no prepayment penalty and no risk of a lien being put on your home, many homeowners have taken advantage of this spectacular loan. The payment of this loan when factoring the same example from above comes out to only $99/month, a huge difference from a typical $200/month electricity bill from PSE& G that most Long Islanders are used to paying. There are no monthly increases and once you pay off the loan you are left with NO monthly payments for your electricity. And best of all, as weve already mentioned:
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What Are Your Savings And Roi In The Long
Solar panels are a great investment. You can save up to 70% on your utility bill by purchasing solar panels in cash or using a solar loan. Of course, all of that depends on your property and your ability to take advantage of rebates and tax incentives in your state. On the other hand, leasing solar panels can save you between 10% to 30% on your electricity bill.
However, over time your savings with a lease could be modest to almost none due to the very tricky contract clause called an escalator.
The Benefits Of A Solar Lease
These two programs are zero cost to the homeowner for installation, warranty, and monitoring, said Nevada real estate agentBlake Guinn. If you go with these programs you would have two electric bills, one with the solar company and one with your current utility. Those two bills combined should be less than what your annual bill is today.
The solar company usually handles all the paperwork, too, so its hassle-free as far as the homeowner is concerned. As states continue to emphasize solar see Californias solar panel mandate leasing could be an affordable option for many residents.
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Buying Is The Best Option For A Starter Home
Thanks to millennials, the real estate term, starter home may go away in the next few years. But some people do still buy houses that they plan to live in, only until they can afford a bigger, nicer house, in a more prestigious zip code.
While you are analyzing the pros and cons of leasing vs buying solar panels, you will want to consider how long you intend to live in your current home.
Should you buy solar panels for your starter home? The answer is a tentative yes, especially if you are going to keep this house for at least five years.
Make sure the company from which you buy your panels is willing and able to move them to a new location.
Obtain the cost of doing that, preferably in writing. And read your warranty to make sure that it isnt void if the panels are moved. Here is a guide on how to test a solar panel.
Cons Of Solar Leasing
Solar leasing is certainly not for everyone, though, as these contracts can come with a certain level of risk and concern as well:
- As utility rates increase, the leasing price also increases each year and could undercut expected cost benefits.
- Since you do not own solar panels, you are not entitled to the federal solar tax credit or local benefits.
- Although there isn’t a high upfront cost, over the system’s lifetime, you’ll likely end up paying an equivalent or higher amount than what you would have if you bought the solar panels outright.
- Leased solar panels don’t add value to your property like panels you own do, because they are not a part of the property you own.
- Breaking your lease may be a hassle if you wish to move.
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Quality Maintenance Isnt Guaranteed
Free maintenance is usually included for leased solar panels, but the standard of service doesnt always live up to consumer expectations.
John McDonnell, the founder of Watthub, which is an online platform that lists solar professionals, warns that many solar systems dont get the maintenance required. But homeowners have to keep paying the lease payment every montheven if they dont get the full service.
In any case, opting for a solar lease just to get free maintenance doesnt make any sense at all. If this is important to you, shop around and instead find a solar company that offers a maintenance service on purchased systems.
Thinking About Going Solar Then You Want To Buy Your System
Buying your solar panel system is the most economical choice for home and business owners looking to join the solar movement thats swept the nation. While the figures of buying your system may look intimidating at first when factoring in all the assistance and options available it becomes evident that buying is the best option for those looking to save the most money.
The average price for a solar system on Long Island is about $30,000 in total. However, this figure is subject to a reduction of 25% right off the bat with the available New York State Tax Credit. Now factor in the 30% Federal Tax Credit which is available to everyone switching to solar in the United States and the number drops even more. Finally, theres the $.20 per Watt rebate offered through New York State Energy Research and Development Authority . So lets do the math:
In this example, youve already paid off more than HALF of the Solar System without spending a single penny! And believe it or not, there are even more opportunities available
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What Is A Solar Lease
The short answer? Its just like anything else you lease a home, a car, some land except that its specific to rooftop solar panels. You receive all the benefits of powering your home with solar energy without having to worry about the upfront costs or long-term maintenance. Lets examine this a bit further:
- You can lease solar panels and pay NO upfront costs.
- You dont have to pay to fix or repair the solar panels.
- You support renewable energy.
- The lease is typically 15-20 years.
- You can choose to buy your panels at any time.
You also have two different ways to obtain these solar panels for your roof: a solar lease and a solar Purchase Plan Agreement .6
The Benefits Of Solar Leasing
The appeal of leasing is that you receive a new solar installation for $0 upfront. Getting started costs you absolutely nothing.
Instead, a third-party lessor finances the entire project on your behalf â parts and labor included. This lessor also handles all maintenance and monitoring for you â again â 100% free of charge.
In exchange, you agree to pay for the clean solar electricity that your âleasedâ panels generate. These monthly payments are less than what your utility company charges for its grid electricity. So you begin saving money on your energy bills â starting on Day 1.
Moreover, you also receive all the environmental benefits that come with solar power. So even though youâre technically renting your installation, you end up with a much smaller carbon footprint.
Most solar leasing agreements last between 10 and 20 years. And once the contract is up, youâll have the option to buy your system outright or have the panels removed .
But believe it or not, receiving a brand-new solar installation for free isnât always the best option for all customers.
It sometimes makes sense to buy your panels â even if that means going into debt first.
Letâs take a look.
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A Solar Lease Is Just One More Financial Tool That Is Complex Enough That You Cant Quite See What The Real Cost Of It Is
A lease contract is not easily transferable if you decide to sell the house. According to one large solar leasing company: If you sell your home before the end of the lease, you can transfer the lease to the new owners if they qualify with excellent credit, or you can prepay the lease and add it to your home asking price.Qualifying means a 700 or higher FICO score.
If The System Was Acquired Through A Solar Lease Then You Might Be Required To Take Over The Monthly Payments
Solar leases are quite common, as they allow homeowners who do not have the necessary upfront cash to purchase a system outright to still take advantage of the benefits of solar power. There are four types of solar financing options: leases, power purchase agreements , private loans, and PACE financed systems.
How Leasing Vs Buying Solar Panels Affects Selling Your Home
One of the things to consider when deciding whether to lease or buy your solar panel system is whether you want to sell your home within the lifetime of your loan or leasing agreement.
Moving a solar system from your home is costly and not a great idea, especially since solar panels increase the value of your home, leading to a higher selling price as well as less time on the market.
In fact, there is research out there on it.
Heres some of the findings:
- Potential buyers are willing to pay an extra $12,000 to $15,000 for a home with just an average sized solar array, more with a larger array.
- Each additional $1 in utility bill savings from your solar installation can add a whopping $20 to your home value.
- Homes with solar arrays sold 20% faster, and for 17% more.
This means that having solar panels installed on your home is a great idea, but if youre considering moving, youll have to take that into account when deciding between leasing or buying your system. In this case, buying your system with cash or with a loan is possibly a better investment.