Why Is Buying Solar Panels Better Than Leasing
The low start-up costs can make leasing seem appealing. In addition, companies offering leasing will often handle some maintenance and repairs of the panels for you and some even offer apps to help you track your system. Make no mistake, however leasing comes at a cost and can be problematic if you decide to sell your property.
Buy Or Lease Solar Panels An Unreliable Business Model
One of the most worrying aspects of solar leasing is the fact that many solar companies who offer leasing do not last for very long. As solar leasing is a very short-sighted concept, this problem extends into the lifespan of many of the companies who offer it, and they frequently fold several years down the line, leaving many of their customers trapped with solar panel systems that they are paying increasingly more for as the years go on.
Sometimes, when a solar company closes shop, they do the right thing and carefully select their buyer to ensure that all of the active leases are handled respectfully, fairly, and professionally. Sadly, there are many providers who simply do not pay this level of diligence to their buyer selection process. Solar companies have been known to simply hand ownership of their panels over to buyers and sail off into the sunset, not once worrying about the impact that this could have on their existing customers.
The problem with this is that quite often, the new owners of the solar panels are not easily contactable. This makes it an absolute nightmare to perform simple tasks like discussing your lease and payments or scheduling any kind of servicing and maintenance.
In other words, you may be stuck paying into a solar lease without having any real idea about who your money is going to, while also having no means of discussing the possibility of ending your contract early or even sustaining your panels.
Our Recommendation Install Solar Panels On Your Home
Here we are: leasing vs. buying. Both give you the warm fuzzies of knowing youre helping the planet by using renewable energy from solar power in your home. Leasing offers you solar panels with limited upfront costs, but lower lifetime savings, while buying asks you for a large initial investment, while promising relatively prompt payback and higher lifetime savings.
To put it another way, check out this 2016 chart from Consumer Reports.
- A Lease or PPA = about $25,000 savings in 20 years
- A Loan = about $40,000 savings in 20 years
- Cash = about $60,000 savings in 20 years
And when you factor in paying yourself back, youre making close to $90,000 in savings over 20 years. Thats a huge argument in favor of full ownership.
In fact, most solar industry experts recommend ownership over leasing because of those greater financial benefits. Youre able to use all of your solar energy, instead of ceding your tax credits and solar buyback potential to a third-party solar installer.
Most of them also recognize that not everyone can afford outright ownership. And when combined with statistics showing that over 75% of Americans simply cant use rooftop solar, its obvious the industry has a long way to go before it reaches full-scale adoption.9
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Recap Of Buying Vs Leasing Solar Panels
Whether you buy or lease solar panels, youre making a positive impact on the world. If you have the financial ability to buy your solar panels outright, or secure financing for a solar loan, the payoff will be much greater than a solar lease. Buying allows you to take advantage of all applicable solar panel incentives, be the owner of all the energy you produce, and achieve much greater savings in the long-run.
Contact MOXIE today for a free, no-obligation solar cost quote so you can make the best decision for your unique situation.
How Much Does It Cost To Lease A Solar Panel What Are The Solar Lease Rates Like
On average, depending on the size of your system based on the energy requirements of your home, it costs between $50$250 to lease solar panels from a solar company per month. However, this assumes that there is no escalation clause built into your solar contract. These are starting estimate figures only.
As previously mentioned, these clauses can lead to incredibly negative financial situations with solar leases because they can actually lead to you paying more for accessing solar power than you would for standard electricity. Though you have already seen figures for a $200 per month solar system and how escalation can massively amplify costs over the years, we are now going to show you figures per year for a wider variety of systems to get a true account of the real costs associated with solar leasing.
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You Wont Own The Solar Panels
The solar system is owned by a third-party developer, not you. If you lease the system or have a PPA, SRECs are normally owned by a third-party developer.
Furthermore, because you dont own the panels, you dont have control over them. You also wont get the added benefits from various financial credits .
Is It Better To Lease Or Buy Solar Panels
HomeIs It Better to Lease or Buy Solar Panels?
When you decide to get solar panels for your property, you might be surprised to find that leasing solar panels is an option. Choosing between leasing and buying your solar panels can impact your costs and the financial benefits of your system, so it makes sense to consider which is the best option for you.
Is It Better To Buy Or Lease Solar Panels Who Owns The Panels
You already know that if you purchase a solar panel system outright, then the solar panels that form the backbone of said system are unquestionably yours. It is the same in the long run at least when you take out a solar loan. Even though you might not be the immediate owner of the panels and overriding system, eventually, once your last payment is made, the entire solar panel system that is currently nestling comfortably on the roof of your house is going to be yours.
But what about when you take out a solar lease? When you are pumping all of your hard-earned money into the pockets of a solar company every month, especially when you are paying more over time due to an escalation clause, will you one day have something to show for it?
Unfortunately, you will not. One of the most negative aspects of solar leasing is the fact that when you finally get to the end of your 25-year lease term, the owners of the panels will simply come to your home and take your panels away. They can do this because they are the true owners of the panels.
As sad as that may seem, for all of the time that you have spent pumping money into the solar panel system that has sustained your home over the years, you are not actually going to have anything to show for it at the end of the lengthy 2025-year term. Sure, you might never have been able to access solar power without a lease, but this begs the question of questions. Why did you want to do it in the first place?
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:
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Lease Vs Own: Post Solar Installation Differences
- Lease & PPA Process
- Customer applies for a credit check
- Receive approval from the solar company youre purchasing the energy from
- You own the solar energy system and are responsible for monitoring the performance and maintaining it.
- Depending on your solar installer, your purchase may not include a customer portal or application to track your solar systems performance.
- The solar leasing company owns and maintains the solar power system. This means that they are also responsible for the underperformance of the system.
- Most leasing companies provide a free customer portal or application that tracks the performance of your solar energy system.
What Does It Mean To Lease Solar Panels For Your Property
When you lease solar panels, the company providing the panels owns them. Your lease is generally for 20 to 25 years, and after your lease term is over, you can renew the lease or purchase the panels. While the initial costs of installing the panels are low, you will be charged a monthly cost for the panels.
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Good Reasons Not To Lease Solar Panels
Even if you dont have the cash to buy your solar panels, in most cases, Im fully convinced that its not a good idea. PPA agreements are similar to leases, and I advise avoiding these, at least for residential solar systems. It would be better to take a loan to pay for the system so that you own it.
Solar systems that are owned, even if they have been financed, are really the best option if you want to make the purchase viable and get a decent return on investment .
Here are 16 important reasons why you definitely shouldnt lease solar panels. Consider them all carefully before you make a decision to lease solar panels.
Purchasing Solar Panels In Cash
- Added value to your home
- Expensive initial investment
- Funds are tied-up for several years
If youre looking to save as much money as possible, consider purchasing your solar installation outright. Youll avoid the loan interest and lease payments that dig into your overall savings and as the sole owner of the installation, youll also be able to take advantage of any financial incentives or tax breaks to lower your overall investment. This includes the 30% federal tax credit set to expire in 2019.
Youll not only save more, but youll add value to your home as well. A 2015 study from the federally-funded Lawrence Berkeley National Lab found that, from 1999 to 2013, home buyers were willing to spend an extra $4/watt on average for homes with solar installation owned by the homeowner . At this rate, a medium-sized 5kW installation is worth about $20k when it comes time to sell your house.
Cash is also the easiest financing option. You pay the installer. They install. Youre done. No long term commitment. No lease contracts. Its simple and efficient.
Lets do some math to see how much you can save by purchasing solar in cash.
With solar costing about $3.05 per watt on average in the US , that 5kW installation mentioned above costs about $15,250 before any incentives.
Average installation cost:
With most solar installations taking about 8 to 12 years to recoup the initial investment, it is quite a long time for your money to be tied up.
Savings over 25 years:
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Increasing Your Home Value
If you install your own solar energy system, the value of your home will increase.
Ive done a hefty breakdown on the topic that shows the significance of the value increase of your home.
But in the short of it, according to the Lawrence Berkley National Lab, you can expect that 1 watt of power adds $4 value to a home.
So, generally speaking, you can expect a $20,194 boost for your home resale price if you install your own system instead of leasing one. This could be higher or lower depending on the state, the size of the system, et cetera.
Why Leasing Solar Is A Bad Idea
One of the most attractive prospects of a solar lease is that you are not responsible for maintaining the solar panels. Here are the realistic costs of annual solar panel maintenance for the majority of average-sized systems over the years.
|Potential escalation cost per month after 25 years?||$350|
What does this mean? Well, at the 10-year mark with a purchased solar system, you are usually getting ready to put your feet up and relax because you have made all of the money back that you spent on your system in the first place. Provided you do not have any major issues, you will just need to perform 12 cleanings a year and an optional annual inspection.
After 10 years when you are leasing, even though your service and maintenance costs are covered, this is the point where you start to pay more than the equivalent of performing annual inspections and cleanings. Every year beyond that, you are paying much, much more per annum in total than you would if you owned your own solar system.
Unless anything goes wrong with one of the mechanical components of your panels, the figures in the first table are realistically the most you are likely to have to pay out per year to keep your panels in prime condition as a solar panel system owner.
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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.
Cost Of Leasing Vs Buying
The principal reason for leasing solar equipment instead of buying it is to save money. A full residential solar setup, including the 20 to 25 panels needed to completely offset the average electricity bill, can cost between $15,000 and $25,000, depending on the quality of the equipment and locality. Considering the average cost of fossil fuel-generated electricity in the U.S. is about $115 per month, the system would pay for itself in 10 to 20 years, and that’s without all the available solar tax credits and incentives. In 2021, solar panel purchasers are granted 26% in investment tax credit, which can take up to $6,500 off the total bill.
Leasing solar equipment doesn’t qualify you for those tax credits and incentives but can cost as little as $50 per month with little to no down payment. Larger installations can cost upwards of $150 per month.
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A Real Life Story On Leasing Solar Panels
Ill actually start this out with a couple, potentially very scary stories/warnings.
As Ive gone to purchase homes both for myself and for the company to do our net-zero home renovations on, I sometimes run into properties with descriptions like this:
Beautiful small home nestled in the heart of XYZ city. Price is $220,000 with solar panels, $180,000 if you pay of the solar system.
Now, in the madness of the real estate market and trying to find a home in general, you have to figure this one out. What it means is that the sellers had signed a solar lease, and they cannot sell the house without paying off the system contract price to the solar company that owns this lease.
The realtor, in this case, had told me that the previous couple had made an emotional decision and signed, but now there was a lien on the house and the system has to be paid off by $40,000 before they can sell.
Since we design solar systems here and after taking a look at the roof, I knew the system only cost the installer a max of $15,000 or so, given the amount of panels and overall KW size.
This isnt to scare you off immediately here, but these are real stories. Be careful of what youre signing up for and read these contracts fully, and probably multiple times over.